Insurance Exam

Which of the following will NOT be considered unfair discrimination by insurers? a)Assigning different risk classifications to applicants based on gender identity b)Discriminating in benefits and coverages based on the insured's habits and lifestyle c)Charging applicants with similar health histories different premiums based on their ethnicity d)Cancelling individual coverage based on the insured's marital status

b)Discriminating in benefits and coverages based on the insured's habits and lifestyle Discriminating between individuals of the same class with equal life expectancies, or by reason of race, nationality, or ethnic group would be considered unfair discrimination. Insurers are also not allowed to cancel individual coverage due to a change in marital status. Discriminating in benefits based on the insured's habits and lifestyle (such as smoking or dangerous hobbies) is acceptable.

An insured purchased a life insurance policy on his life naming his wife as primary beneficiary, and his daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit? a)If the insured died from accidental means b)If the primary beneficiary predeceases the insured c)The primary and contingent beneficiaries share death benefits equally d)With the primary beneficiary's written consent

b)If the primary beneficiary predeceases the insured The daughter, as contingent beneficiary, would need to outlive the insured and primary beneficiary.

Which of the following best describes the unfair trade practice of defamation? a)Refusing to deal with other insurers b)Making derogatory oral statements about another insurer's financial condition c)Assuming the name and identity of another person d)Issuing false advertising material

b)Making derogatory oral statements about another insurer's financial condition Making oral or written statements directly or indirectly which are derogatory or maliciously critical of another insurer would be an example of the unfair trade practice of defamation.

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)Face amount of the policy. b)The insured's age at death. c)The beneficiary's life expectancy. d)Projected interest rates.

b)The insured's age at death. The insured's age at death will not be considered, but the longer the life expectancy of the recipient, the lower the payments will be.

Agents who persuade insureds to cancel a policy in favor of another one when it might not be in the insured's best interest are guilty of a)Rebating. b)Twisting. c)Defamation. d)Misrepresentation.

b)Twisting Twisting is a misrepresentation that persuades an insured or a policyowner, to his or her detriment, to cancel, lapse, or switch policies.

Which of the following terms is used to describe a person, other than a viator, that enters into or effectuates a viatical settlement contract? a)Viatical settlement effectuator b)Viatical settlement provider c)Viatical settlement purchaser d)Viatical settlement broker

b)Viatical settlement provider "Viatical settlement provider" means a person, other than a viator, that enters into or effectuates (makes effective) a viatical settlement contract.

An insurance agent was born in 1978, and became licensed in 2013. What is the closest year by which the agent must complete his continuing education requirements? a)2014 b)2015 c)2016 d)2017

c)2016 Agents born in odd-numbered years will complete their CE requirements every odd-numbered year; agents born in even-numbered years will complete their CE credits every biennium in even-numbered years. Newly licensed agents have the remainder of the present biennium, plus the next biennium, to meet their first continuing education deadline.

Life insurance policies that have cash value must provide for a maximum policy loan interest rate of no more than a)12% per annum. b)9% per annum. c)8% per annum. d)6 1/2% per annum.

c)8% per annum. The following policy loan provisions apply to any policy that has a cash value element: a provisions allowing a maximum interest rate not to exceed 8% per year, or a provision allowing an adjustable maximum interest rate established periodically.

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)Universal life b)Whole life c)Decreasing term d)Variable life

c)Decreasing term

What provision in a life or health insurance policy extends coverage beyond the premium due date? a)Automatic premium loan b)Waiver of premium c)Grace period d)None of the above

c)Grace period The grace period is a mandatory provision found in all life and health insurance policies that provides coverage for a period of time after the premium becomes past due.

Which provision of a life insurance policy states the insurer's duty to pay benefits upon the death of the insured, and to whom the benefits will be paid? a)Beneficiary clause b)Consideration clause c)Insuring clause d)Entire contract clause

c)Insuring clause The insuring clause states that the insurer agrees to provide life insurance for the named insured which will be paid to a designated beneficiary when proof of loss is received by the insurer. It states the party to be covered by the policy and names of the beneficiary who will receive the policy proceeds in the event of the insured's death. If no beneficiary is named, the policy proceeds will be paid to the insured's estate.

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 nothing; there was a misrepresentation on the application b)Pay the full death benefit and refund excess premium c)Pay a reduced death benefit d)Pay the full death benefit

c)Pay a reduced death benefit The incontestability clause prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years. However, it does not apply to statements relating to age, sex and identity.

Which of the following is NOT a requirement for obtaining a nonresident license in this state? a)Being at least 18 years old b)Submitting the NAIC Uniform Application c)Providing a Certification Letter from the home state d)Paying $30 application fee

c)Providing a Certification Letter from the home state A Certification Letter from the agent's home state is not required; license status is verified through the Participating State Report - PDB. All the other listed requirements must be met.

When is the earliest a policy may go into effect? a)When the insurer approves the application b)After the underwriter reviews the policy c)When the application is signed and a check is given to the agent d)When the first premium is paid and the policy has been delivered

c)When the application is signed and a check is given to the agent The policy can be effective as early as the date of the application, if the premium is submitted with the application and the policy is issued as applied for.

The death benefit under the Universal Life Option B a)Decreases by the amount that the cash value increases. b)Increases for the first few years of the policy, and then levels off. c)Remains level. d)Gradually increases each year by the amount that the cash value increases.

d)Gradually increases each year by the amount that the cash value increases. 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.

Which of the following statements about the reinstatement provision is true? a)It permits reinstatement within 10 years after a policy has lapsed. b)It provides for reinstatement of a policy regardless of the insured's health. c)It guarantees the reinstatement of a policy that has been surrendered for cash. d)It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated.

d)It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated. Upon policy reinstatement, the policyowner will be required to pay all back premiums plus interest, and may be required to repay any outstanding loans and interest.

An insured purchased a life policy in 2010 and died in 2017. The insurance company discovers at that time that the insured had concealed information during the application process. What can they do? a)Refuse to pay the death benefit because of the fraud b)Pay a decreased death benefit c)Sue for the right to not pay the death benefit d)Pay the death benefit

d)Pay the death benefit The incontestability clause prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years, even on the basis of a material misstatement of facts or concealment of a material fact.

Nonforfeiture values guarantee which of the following for the policyowner? a)That the dividends will be paid annually b)That the death benefit will be paid in a lump sum c)That the policy premiums will never increase d)That the cash value will not be lost

d)That the cash value will not be lost

For which of the following is the Life and Health Guaranty Association liable? a)The amount the insurer would have been liable for if it had not become impaired. b)The policy limit. c)$100,000 in total net cash surrender and net cash withdrawal values for life insurance. d)The Association is liable, at most, for the lesser of all of the above benefits.

d)The Association is liable, at most, for the lesser of all of the above benefits. The Association is liable, at most, for the lesser of the following benefits: the amount the insurer would have been liable for if it had not become impaired; the policy limit; $100,000 in total net cash surrender and net cash withdrawal values for life insurance.

In which of the following situations would replacement rules apply? a)The new contract is with the same insurer and a conversion privilege is being exercised. b)The existing life insurance is a nonconvertible term policy with less than 10 years to expire. c)The solicitation is made by mail. d)The existing life insurance is converted into paid-up insurance.

d)The existing life insurance is converted into paid-up insurance. Replacement would involve converting an existing policy into a paid-up insurance. Replacement rules do not apply to any other situations given above.

All of the following are true of key person insurance EXCEPT a)There is no limitation on the number of key employee plans in force at any one time. b)The employer is the owner, payor and beneficiary of the policy. c)The key employee is the insured. d)The plan is funded by permanent insurance only.

d)The plan is funded by permanent insurance only. Key Person coverage may be funded by any type of life insurance.

If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant a)Upon issuance of the policy. b)Within 30 days after the first premium payment was collected. c)Prior to filling out an application for insurance. d)With the policy.

d)With the policy. If a life insurance policy contains a free-look period of at least 10 days, the buyer's guide can be delivered with the policy. If it doesn't, the buyer's guide must be delivered prior to accepting the initial premium.

The president of a manufacturing company has offered on of the company's officers a special individual annuity plan that is unavailable to lower-echelon employees. This plan would be funded with before tax corporate dollars, and it does not meet government approval standards. The annuity plan is A. A nonqualified plan B. An executive Annuity plan C. Subject to government strandards D. Illegal

A. A nonqualified plan

Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary? A Fixed Amount B Life income with period certain C Joint and surviovor D Single life

B Life income with period certain

An insured pays a 100 premium every month for his insurance coverage, yet the insurer promises to pay 10,000 for a covered loss. What characteristic of an insurance contract does this describe? A Adhesion B Conditional C Aleatory D Good Health

C Aleatory

Who is a person, other than a viator, that enters into a viatical settlement contract? A Effectuator B Broker C Provider D Purchaser

C Provider

Another name for a substandard risk classification is A Declined B Elevated C Rated D Controlled

C Rated

Methods used to pay the death benefits to a beneficiary upon the insured's death are called A Beneficiary provisions B Death Benefit options C Settlement options D Designation options

C Settlement options

What is the training requirement for producers who want to sell annuities in Kansas? A.3 hour of continuing education on annuities every licensing period B. Annual 4 - hour training course C. one-time 4 hour training course D. there is no requirement. A life license qualifies a producer for the sale of annuities

C. one - time 4 hour training course

Which of the following terms describes making false statements about the financial conditions of any insurer that are intended to injure any person engaged in the business of insurance? A Under Cutting B Twisting C Slandering D Defamation

D Defamation

An insured committed suicide one year after his life insurance policy was issued. The insurer will? A Pay the policy cash values B Pay the full death benefit C Pay nothing D Refund the premiums paid

D Refund the premiums paid

Which of the following is INCORRECT concerning a noncontributory group plan? A. they help to reduce adverse selection against the insurer B. they require 100% employee participation C. the employer pays 100% of the premiums D. the employees receive individual policies

D. the employees receive individual policies

In life insurance contracts in this state, how long may dividend payments be deferred? a)5 years b)7 years c)10 years d)2 years

a)5 years Deferring dividend payments more than 5 years is a prohibited practice in Kansas.

In Kansas, which of the following provisions is legal? a)Cancellation of a policy if amount of loan is more than loan value b)Backdating a policy more than 6 months c)Deferring dividends more than 5 years d)Cancellation of a policy if amount of loan is less than loan value

a)Cancellation of a policy if amount of loan is more than loan value Backdating more than 6 months is illegal, as well as deferring dividends more than 5 years. Cancellation of the policy if amount of loan is less than loan value is illegal as well.

Which of the following is TRUE regarding the annuity period? a)It may last for the lifetime of the annuitant. 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.

a)It may last for the lifetime of the annuitant. 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.

Which of the following is NOT a requirement in order to be a nonresident licensee? a)Maintain a physical address in each state the licensee transacts insurance b)Be in good standing in the resident license state c)Submit the proper application fee d)Submit a copy of his/her application for the resident license

a)Maintain a physical address in each state the licensee transacts insurance A person who is not a resident of Kansas may receive a nonresident license if he or she is a licensed resident insurance producer in good standing in the state where they are domiciled; submits the proper application and fee and biennial renewal fee; submits a copy of his or her application for the resident license to the Commissioner; and lives in a state that awards nonresident status to insurance producers of Kansas on a reciprocal basis.

Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy? a)Premiums are not tax deductible as a business expense. b)Premiums are tax deductible by the key employee. c)Premiums are tax deductible as a business expense. d)Premiums are taxable to the employee.

a)Premiums are not tax deductible as a business expense. The business cannot take a tax deduction for the expense of the premium. However, if the key employee dies, the benefits paid to the business are usually received tax free.

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.

a)The earnings in the plan accumulate tax deferred. Contributions are tax deferred, and earnings on the money in the plan accrue on a tax-deferred basis.

Which of the following best describes what the annuity period is? a)The period of time during which accumulated money is converted into income payments b)The period of time from the accumulation period to the annuitization period c)The period of time during which money is accumulated in an annuity d)The period of time from the effective date of the contract to the date of its termination

a)The period of time during which accumulated money is converted into income payments The annuity period is the time during which accumulated money is converted into an income stream.

All of the following are TRUE of the federal tax advantages of a qualified plan EXCEPT a)Employee and employer contributions are not counted as income to the employee for income tax purposes. b)At distribution, all amounts received by the employee are tax free. c)Employer contributions are tax deductible as ordinary business expense. d)Funds accumulate on a tax-deferred basis.

b)At distribution, all amounts received by the employee are tax free. Funds in a qualified plan accumulate on a tax-deferred basis; however, at distribution any amount received by the employee will be treated as ordinary income for tax purposes.

Which of the following determines the length of time that beneficiary will be received under the Fixed - Amount settlement option? A size of each installments B predetermined length of time stated in the contract C length of income period D amount of interest

A size of each installments

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

A. Face amount

An insurance producer licensed in life must complete 12 hour of continuing education courses every A 18 months B 2 years C 1 year D 2 years

B. 2 years

The validity of coverage under life insurance policy may not be contested, except for nonpayments of premium, after the policy had been in force for at least how many years? A. 1 year B. 2 years C. 5 years D. 7 years

B. 2 years

The term "fixed" in a fixed annuity refers to all of the following EXCEPT? A. Equal annuity payments B Amount and length of payments C. Death benefit D. Guaranteed rate of interest

C. Death benefit

Which of the following would help prevent a universal life policy from lapsing? A Corridor of insurance B Target of Premium C Face Amount D Adjustable premium

D)Target premium Reasons: The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.

Under an extended term nonforfeiture option, the policy cash value is converted to a)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.

a)The same face amount as in the whole life policy. Under this option the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy.

All of the following are requirements for life insurance illustrations EXCEPT: A. they must differentiate between guaranteed and projected amounts. B. they must be part of the contract C. they may only be used as approved D. they must identify non guaranteed values

B. they must be part of the contract

Every two years, producers are required to fulfill continuing education requirements. How many of these credit hours must be dedicated to ethics? a)3 b)5 c)1 d)2

c)1 All producers are required to take at least 1 credit hour in ethics courses.

which of the following is the best reason to purchase life insurance rather than annuitanties? a. to create regular income payments b.to liquidate a sum of money over a lifetime c.to create an estate d.to liquidate a sum of money over a period of years

c.to create an estate

If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered 1. A misrepresentation 2. An accurate statement 3. A legal representation of the Association 4. An unfair trade practice.

4. An unfair trade practice.

All of the following are personal uses of life insurance except A cash accumulation B Buy Sell agreement C survivor protection D estate creation

B Buy Sell agreement

A Return of Premium term life policy is written as what type of term coverage? A. Renewable B. Increasing C. Decreasing D. Level

B. Increasing

In which of the following instances would the premiums be tax deductible? A. Premiums paid by an employer on the life of a key person B. Premiums paid by an employer on a $30,000 group term life insurance plan for employees C. Premiums paid by an individual on his or her own life insurance D. Premiums paid by a mother on her sons policy

B. Premiums paid by an employer on a $30,000 group term life insurance plan for employees

Which of the following statements would best describe the difference between viatical settlements and accelerated death benefits? A. Viaticals use mortality tables, but Accelerated Death Benefits are determined by Morbidity B. Viaticals are funded by a third party, and Accelerated Death Benefits are provided by the insurer that issued the original policy C. Viaticals are provided by the insurer that issued the original policy, and Accelerated Death benefits are funded by a third party D. Viaticals are determined by morbidity but Accelerated Death Benefits use mortality tables

B. Viaticals are funded by a third party, and Accelerated Death Benefits are provided by the insurer that issued the original policy

In a life settlement contract whom does the life settlement broker represent? A the beneficiary B the life settlement intermediary C the owner D the insurer

C the owner

An individual purchases a permanent life insurance policy with a face value of 25,00. while this is all the insurance that he can afford at this time sure that additional coverage will be available in the future. which of the following options should be included in the policy? A Dividend Options B Guaranteed Renewable Options C NonForfeiture Options D Guaranteed insurability option

D Guaranteed insurability option

What is the waiting period on a Waiver of Premium rider in life insurance policies? A. 30 days B. 3 months C. 5 months D. 6 months

D. 6 months

An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice? A Defamation B Illegal C A legal adverting strategy D Unfair discrimination

Illegal

The minimum interest rate on an equity indexed annuity is often based on a)An index like Standard & Poor's 500. b)The returns from the insurance company's separate account. c)The annuitant's individual stock portfolio. d)The insurance company's general account investments.

a)An index like Standard & Poor's 500. Equity indexed annuities are not securities, but they invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity, the equity indexed annuity has a guaranteed minimum interest rate. Interest rates on equity indexed annuities are often tied to a familiar index, such as the Standard and Poor's 500.

All of the following are true regarding rebates EXCEPT a)Rebates are allowed if it's in the best interest of the client. b)Rebates are only allowed if specifically stated in the policy. c)Rebating can be anything of economic value, given as an inducement to buy. d)Dividends are not considered to be rebates.

a)Rebates are allowed if it's in the best interest of the client. A rebate is an illegal act which involves returning something of value to the client as an inducement to buy, such as the commission. Rebates are only allowed if specifically stated in the policy. Insurance dividends are not considered rebates as the IRS considers it as a return of overpaid premium.

Which statement is true about the proceeds of a life insurance policy? a)The lawful beneficiary is entitled to all policy benefits free from all claims of creditors or representatives of the insured's estate. b)No proceeds can be paid to the lawful beneficiary unless he/she is at least 18 years old. c)The beneficiary must have an insurable interest in the insured. d)The lawful beneficiary receives the proceeds after all creditors of the estate have been paid.

a)The lawful beneficiary is entitled to all policy benefits free from all claims of creditors or representatives of the insured's estate. There is no requirement that the beneficiary show insurable interest with respect to a life insurance policy. Death benefits are paid to the beneficiary and are not subject to the creditors of the insured's estate, unless there was an assignment of benefits prior to the insured's death.

Which of the following is NOT true regarding Equity Indexed Annuities? a)They earn lower interest rates than fixed annuities. b)The insurance company keeps a percentage of the returns. c)They have guaranteed minimum interest rates. d)They are less risky than variable annuities.

a)They earn lower interest rates than fixed annuities. Equity Indexed Annuities invest on an aggressive basis in order to yield higher returns. Like a fixed annuity, Equity Indexed Annuities have guaranteed minimum interest rates. The insurance company often keeps a predetermined percentage of the return and pays the rest to the annuity owner. Equity Indexed Annuities are less risky than variable annuities and earn higher interest rates than fixed annuities.

All of the following benefits are available under Social Security EXCEPT a)Welfare benefits. b)Old-age and retirement benefits. c)Disability benefits. d)Death benefits.

a)Welfare benefits. Social Security is an entitlement program, not a welfare program.

When transacting business in this state an insurer formed under the laws of another country is known as a/an a)Admitted insurer. b)Alien insurer. c)Domestic insurer. d)Foreign insurer.

b)Alien insurer. Alien insurer is defined as an insurer formed under the laws of another country.

The Commissioner has full power and authority to do all of the following EXCEPT a)Issue cease and desist orders. b)Draft insurance laws. c)Issue Certificates of Authority. d)Enforce the Insurance Code.

b)Draft insurance laws. The Commissioner enforces the Insurance Code, but does not write insurance laws.

Which of the following is an eligibility requirement for all Social Security Disability Income benefits? a)Be at least age 50 b)Have attained fully insured status c)Be disabled for at least 1 year d)Have permanent kidney failure

b)Have attained fully insured status Although Social Security offers many benefits, such as retirement, survivors and Medicare, only those who have attained fully insured status are eligible for Disability Income benefits. Contributing to Social Security for 40 quarters (10 years) attains fully insured status.

Which of the following is NOT a type of whole life insurance? a)Limited payment b)Increasing term c)Single premium d)Straight life

b)Increasing term There are several types of whole life policies. The first three, Straight Life, Limited Payment, and Single Premium, are the basic forms of whole life. Increasing term is a type of term insurance.

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)Dividend Accumulation option b)Paid-up option c)Accumulation at Interest d)Paid-up additions

b)Paid-up option With the paid-up option, the insurer can accumulate dividends at interest and then use them, in addition to interest and the policy's cash value, to pay the policy earlier than planned. This is different from paid-up additions, in which the dividends are used to buy additional policies that increase the face amount of the original policy.

All of the following are characteristics of group life insurance EXCEPT a)Certificate holders may convert coverage to an individual policy without evidence of insurability. b)Premiums are determined by the age, sex and occupation of each individual certificate holder. c)Amount of coverage is determined according to nondiscriminatory rules. d)Individuals covered under the policy receive a certificate of insurance.

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

Which nonforfeiture option provides coverage for the longest period of time? a)Accumulated at interest b)Reduced paid-up c)Extended term d)Paid-up option

b)Reduced paid-up The reduced paid-up nonforfeiture option would provide protection until the insured reaches 100, but the face amount is reduced to what the cash would buy.

Which two terms are associated directly with the way an annuity is funded?a)Renewable or convertible b)Single payment or periodic payments c)Increasing or decreasing d)Immediate or deferred

b)Single payment or periodic payments Annuities are characterized by how they can be paid for: either a single payment (lump sum) or through periodic payments in which the premiums are paid in installments over a period of time. Periodic payment annuities can be either level, in which the annuitant/owner pays a fixed installment, or the payments can be flexible, in which the amount and frequency of each installment varies.

All of the following would be different between qualified and nonqualified retirement plans EXCEPT a)IRS approval requirements b)Taxation on accumulation c)Taxation of withdrawals d)Taxation of contributions

b)Taxation on accumulation Taxation on accumulation is deferred in both types of plans. The rest of the characteristics would differ.

A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true? a)The amount distributed is subject to ordinary income tax. b)The amount of the distribution is reduced by the amount of a 20% withholding tax. c)No taxes are due since the plan participant is over age 59 1/2. d)There is a 10% early withdrawal penalty.

b)The amount of the distribution is reduced by the amount of a 20% withholding tax. Distributions from 401(k) plans are taxable as ordinary income in the year of the distribution. However, if the distribution is rolled over to a Traditional IRA, taxes are deferred until the required minimum IRA distributions begin (which is generally no later than age 70 1/2). Since this client actually took a distribution (instead of making a trustee-to-trustee roll over), the distribution is subject to 20% withholding tax.

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.

b)The annuitant assumes the risks on investment. The payments that the annuitant invests into the variable annuity are invested in the insurer's separate account. The separate account under many annuities provides the annuitant with a dozen or more investment options ranging from "money market funds" to "growth stock funds" to "precious metal funds". Therefore, the annuitant assumes the risk of the investment.

Under an extended term nonforfeiture option, the policy cash value is converted to a)A higher face amount than the whole life policy. b)The same face amount as in the whole life policy. c)The face amount equal to the cash value. d)A lower face amount than the whole life policy.

b)The same face amount as in the whole life policy. Under this option the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy.

If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply? a)10 days b)3 days c)5 days d)7 days

c)5 days Consumers must be advised that they have a right to request additional information concerning investigative consumer reports, and the insurer or reporting agency has 5 days to provide the consumer with the additional information.

Who can make a fully deductible contribution to a traditional IRA? a)Someone making contributions to an educational IRA b)A person whose contributions are funded by a return on investment c)An individual not covered by an employer-sponsored plan who has earned income d)Anybody: all IRA contributions are fully deductible regardless of income level

c)An individual not covered by an employer-sponsored plan who has earned income Individuals who are not covered by an employer-sponsored plan may deduct the amount of their IRA contributions regardless of their income level.

What characteristic makes whole life permanent protection? a)Guaranteed level premium b)Living benefits c)Coverage until death or age 100 d)Guaranteed death benefit

c)Coverage until death or age 100 Whole Life policies are referred to as permanent protection, since as long as the premium is paid coverage will continue for the life of the insured or till the insured's age 100.

The Commissioner has full power and authority to do all of the following EXCEPT a)Enforce the Insurance Code. b)Issue cease and desist orders. c)Draft insurance laws. d)Issue Certificates of Authority.

c)Draft insurance laws. The Commissioner enforces the Insurance Code, but does not write insurance laws.

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)Ordinary life policy b)Limited pay whole life c)Level term d)Term to specified age

c)Level term A 20-year term policy is written to provide a level death benefit for 20 years.

Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report a)Must be advised that a copy of the report is available to anyone who requests it. b)May sue the reporting agency in order to get inaccurate data corrected. c)Must be informed of the source of the report. d)Are entitled to obtain a copy of the report from the party who ordered it.

c)Must be informed of the source of the report. Under the Fair Credit Reporting Act, if an insurance policy is declined or modified because of information contained in a consumer report, the consumer must be advised and provided with the name and address of the reporting agency.

Which of the following is NOT true regarding the annuitant? a)The annuitant receives the annuity benefits. b)The annuitant must be a natural person. c)The annuitant cannot be the same person as the annuity owner. d)The annuitant's life expectancy is taken into consideration for the annuity.

c)The annuitant cannot be the same person as the annuity owner. While they don't have to be, the annuitant and annuity owner are often the same person. The annuitant is the person who receives benefits or payments from the annuity and for whom the annuity is written. Since the annuitant's life expectancy is taken into consideration, the annuitant must be a natural person.

An insured decides to replace his life insurance policy. The current agent must submit all of the following to the new agent EXCEPT a)The application. b)A copy of the replacement notice. c)The insured's first premium payment for the new policy. d)None of the above. The agent must submit all of these items.

c)The insured's first premium payment for the new policy. In the event of replacement, the current agent must submit to the replacing insurance company, with the application, a copy of the replacement notice.

Under an extended term nonforfeiture option, the policy cash value is converted to a)A lower face amount than the whole life policy. b)A higher face amount than the whole life policy. c)The same face amount as in the whole life policy. d)The face amount equal to the cash value.

c)The same face amount as in the whole life policy. Under this option the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy.

Which of the following is true regarding compensation for the Life and Health Insurance Guaranty Association's Board of Directors? a)They are entitled to a one-time stipend. b)They are compensated for their services. c)They may be reimbursed for the incurred expenses. d)They receive commissions from member insurers.

c)They may be reimbursed for the incurred expenses. While members of the Board are not compensated by the Association for their services, they may be reimbursed for the incurred expenses.

All of the following actions can be described as twisting EXCEPT a)Misrepresenting the terms and conditions of the existing policy to make the new one more attractive b)Embellishing the terms of the proposed policy in order to convince the insured to switch c)Making an incomplete comparison between the existing and proposed policies d)Explaining to client the advantages of permanent insurance over term and suggesting changing policies

d)Explaining to client the advantages of permanent insurance over term and suggesting changing policies Twisting is a misrepresentation, or incomplete or fraudulent comparison of insurance policies that persuades an insured/owner, to his or her detriment, to cancel, lapse, or switch policies from one to another.

All of the following are Nonforfeiture options EXCEPT a)Cash surrender b)Extended term c)Reduced paid-up d)Interest only

d)Interest only Nonforfeiture values include cash surrender, extended term and reduced paid-up. Interest only is a settlement option.

Which Universal Life option has a gradually increasing cash value and a level death benefit? a)Juvenile life b)Term insurance c)Option B d)Option A

d)Option A Under Option A, the death benefit remains level while the cash value gradually increases. The death benefit will increase at a later date in order to maintain a gap between the cash value and the death benefit before the policy matures.

All of the following are true regarding rebates EXCEPT a)Rebates are only allowed if specifically stated in the policy. b)Rebating can be anything of economic value, given as an inducement to buy c)Dividends are not considered to be rebates. d)Rebates are allowed if it's in the best interest of the client.

d)Rebates are allowed if it's in the best interest of the client. A rebate is an illegal act which involves returning something of value to the client as an inducement to buy, such as the commission. Rebates are only allowed if specifically stated in the policy. Insurance dividends are not considered rebates as the IRS considers it as a return of overpaid premium.

An agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. The agent is guilty of a)Coercion. b)Twisting. c)Controlled business. d)Rebating.

d)Rebating. When producers give or promise anything of value that is not specified in the policy, they are guilty of rebating.

Insurance is the transfer of a)Loss. b)Hazard. c)Peril. d)Risk.

d)Risk. Insurance is the transfer of financial responsibility associated with a potential of a loss (risk) to an insurance company.

Which two terms are associated directly with the way an annuity is funded? a)Increasing or decreasing b)Immediate or deferred c)Renewable or convertible d)Single payment or periodic payments

d)Single payment or periodic payments Annuities are characterized by how they can be paid for: either a single payment (lump sum) or through periodic payments in which the premiums are paid in installments over a period of time. Periodic payment annuities can be either level, in which the annuitant/owner pays a fixed installment, or the payments can be flexible, in which the amount and frequency of each installment varies.

Which of the following statements about a suicide clause in a life insurance policy is TRUE? a)Suicide is covered for a specific period of years and excluded thereafter. b)Suicide is covered as long as the policy is in force. c)Suicide is excluded as long as the policy is in force. d)Suicide is excluded for a specific period of years and covered thereafter.

d)Suicide is excluded for a specific period of years and covered thereafter. In most states, if death results from suicide within a certain period, the insurer is not obligated to pay the death benefit.

Which of the following is TRUE regarding variable annuities? a)The funds are invested in the company's general account. b)The company guarantees a minimum interest rate. c)A person selling variable annuities is required to have only a life agent's license. d)The annuitant assumes the risks on investment.

d)The annuitant assumes the risks on investment. The payments that the annuitant invests into the variable annuity are invested in the insurer's separate account. The separate account under many annuities provides the annuitant with a dozen or more investment options ranging from "money market funds" to "growth stock funds" to "precious metal funds". Therefore, the annuitant assumes the risk of the investment.

The primary beneficiary of her husband's life policy found that no settlement option was stated in the policy on the date of her husband's death. Who will select the settlement option in this case? a)The benefit must be paid in a lump sum b)The insurance company c)The Court d)The beneficiary

d)The beneficiary If a settlement option is not selected by the policyowner before the insured dies, then the beneficiary can choose the option.

Which statement is true about the proceeds of a life insurance policy? a)No proceeds can be paid to the lawful beneficiary unless he/she is at least 18 years old. b)The beneficiary must have an insurable interest in the insured. c)The lawful beneficiary receives the proceeds after all creditors of the estate have been paid. d)The lawful beneficiary is entitled to all policy benefits free from all claims of creditors or representatives of the insured's estate.

d)The lawful beneficiary is entitled to all policy benefits free from all claims of creditors or representatives of the insured's estate. There is no requirement that the beneficiary show insurable interest with respect to a life insurance policy. Death benefits are paid to the beneficiary and are not subject to the creditors of the insured's estate, unless there was an assignment of benefits prior to the insured's death.

What is the advantage of reinstating a policy instead of applying for a new one? a)Proof of insurability is not required b)The face amount can be increased c)The cash values have gained interest while the policy was lapsed d)The original age is used for premium determination

d)The original age is used for premium determination The reinstatement provision allows the policyowner an opportunity to put a lapsed policy back in force, subject to proving continued insurability. If the policyowner elects to reinstate the policy, as opposed to purchasing a new policy, the reinstated policy is restored to its original status.

What is the timeframe for filing relevant Suspicious Activity Reports? a)Within 30 days of the suspicious transaction b)Within 90 days of initial discovery c)Within 90 days of the suspicious transaction d)Within 30 days of initial discovery

d)Within 30 days of initial discovery Relevant SAR reports must be filed with FinCEN within 30 days of initial discovery of a suspicious transaction.

Group Life insurance is a single policy written to provide coverage to members of a group. which of the following statements concerning group life is CORRECT? A 100% participation of members is required on noncontributory plans B each member covered receives a policy C coverage cannot be converted when an individual leaves the group D premiums are determined by age occupation and individual underwriting

A 100% participation of members is required on noncontributory plans

The term "illustration" in a life insurance policy refers to A. A presentation of non guaranteed elements of a policy B. Depiction of policy benefits and guarantees C. Pictures accompanying a policy D. Charts and graphs

A. A presentation of non guaranteed elements of a policy

All of the following are mandatory life insurance policy provisions except? A. Policy Backdating B Misstatement of age C Incontestability D Grace Period

A. Policy Backdating

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 Life B Variable Universal Life C Universal Life A D Universal Life B

C Universal Life A

Which of the following statements regarding the taxation of Modified Endowment Contracts is False? A Policy loans are taxable distributions B Accumulations are tax deffered C Withdraws are not taxable D distributions before age 59 1/2 incur a 10% penalty on policy gains

C Withdraws are not taxable

Which of the following best describes fixed period settlements options? A the death benefit must be paid out in a lump sum within certain time period B income in guaranteed for the life of the beneficiary C both the principal and interest will be liquefied over a selected period of time D only the principle amount will be paid out within a specified period of time

C both the principal and interest will be liquefied over a selected period of time

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

D. At the end of 20 years, the policy cash value will equal 100,000

In Kansas, all of the following would be prohibited provisions in a life insurance policy EXCEPT? A. a provision allowing the insurer to defer the payment of dividends for more than 5 years B. a provision that allows an insurer to, at maturity, settle a policy for less than the face amount plus dividends, less loans and unpaid premiums C. a provision that states that the agent may act as a representative of the client D. a provision stating the policy owner must obtain prior written consent from the insurer before assigning the policy to another or entity

D. a provision stating the policy owner must obtain prior written consent from the insurer before assigning the policy to another or entity

Which of the following is NOT a possible punishment for a violation of general provisions of the Kansas Insurance Code?a)A maximum fine of $10,000 for a willful violation B)A monetary fine up to $1,000 if a violation is nonwillful c)Suspension of license d)Cease and desist order

a)A maximum fine of $10,000 for a willful violation When, after a hearing, the Commissioner determines that a person has violated any of Kansas insurance statutes, he or she may impose a monetary penalty of up to $1,000 for each unwillful violation, and up to $2,000 for each willful violation; suspension or revocation of the person's license or a company's certificate of authority; or issuance of a cease and desist order.

Which of the following is a true comparison between annuities and life insurance? a)Both annuities and life insurance use mortality tables. b)Annuities serve the same function as life insurance. c)Both provide a lifetime income. d)Neither annuities nor life insurance subject to income taxes.

a)Both annuities and life insurance use mortality tables. Annuities are not life insurance; they do not pay a face amount upon the death of the annuitant. In most cases, the payment phase stops upon the death of the annuitant. Annuities use mortality tables, which reflect a longer life expectancy than the tables used in life insurance.

Which of the following is NOT the consideration in a policy? a)The application given to a prospective insured b)Something of value exchanged between parties c)The premium amount paid at the time of application d)The promise to pay covered losses

a)The application given to a prospective insured Consideration is something of value that is transferred between the two parties to form a legal contract.

Level term insurance provides a level death benefit and a level premium during the policy term. If the policy renews at the end of a specified period of time, the policy premium will be a)Discounted. b)Adjusted to the insured's age at the time of renewal. c)Determined by the health of the insured. d)Based on the issue age of the insured.

b)Adjusted to the insured's age at the time of renewal. If a level term product is renewed at the end of the term period the premium will be based upon the attained age of the insured.

Which of the following would be allowed in a life insurance contract in Kansas? a)Stating that the agent is representing the client b)Backdating a policy's issue date 6 months from the application date c)Deferring dividend payment for more than 5 years d)Canceling the policy if amount of loan is less than loan value

b)Backdating a policy's issue date 6 months from the application date Kansas allows backdating a policy's issue date up to 6 months from the application date. All the other provisions would be prohibited.

Forcing a client to buy insurance from a particular lender as a condition of granting a loan is defined as a)Defamation. b)Coercion. c)Rebating. d)Misleading advertising.

b)Coercion. These are all considered to be Unfair Trade Practices, which are major violations that can lead to heavy penalties. Coercion, for example, is when the bank won't give you an auto loan unless you agree to buy auto insurance from them.

Which of the following entities ultimately decides if an advertisement is complete and truthful? a)Kansas Guaranty Association b)Commissioner c)Consumer Protection Agency d)Federal Advertisement Review Board

b)Commissioner The Commissioner has the power to determine whether an advertisement is clear, truthful, and complete.

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 Clause b)Common Disaster Clause c)Spendthrift Clause d)Settlement Clause

b)Common Disaster Clause The Common Disaster Clause provision states that when an insured and beneficiary die in a common accident, and the beneficiary dies before or within a specific period of time after the insured, the insurer will proceed as if the insured outlived the beneficiary.

Which of the following would not be included in a policy summary? a)Policy loan interest rates b)General advantages and drawbacks to this type of policy c)Policy exclusions d)Cash values

b)General advantages and drawbacks to this type of policy A Policy Summary is usually required to be left with a prospective insured at the time of application. This document provides specific information about the products being considered. It specifies the producer, company, policy, coverage, benefits, limitations, exclusions, costs, and terms of the proposed insurance. The policy summary also includes information concerning cash values and policy loan interest rates.

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 option b)Interest only option c)Life income with period certain d)Joint and survivor

b)Interest only option With the interest-only option, the insurance company retains the policy proceeds and pays interest on the proceeds to the recipient (beneficiary) at regular intervals.

Which of the following is true about the mandatory free-look period in a life insurance policy? a)It is optional on all life insurance policies. b)It commences when the policy is delivered. c)It commences when the application is signed. d)It applies only to term life insurance policies.

b)It commences when the policy is delivered. The free-look provision is a mandatory provision and allows the insured to examine the policy, and if dissatisfied for any reason, return the policy for a full refund of any premiums paid.

How long must a life insurance policy be in force before the owner can enter into a viatical settlement contract? a)90 days b)6 months c)1 year d)2 years

d)2 years No person may enter into a viatical settlement contract within 2 years (24 months) after issuance of the policy.

A life insurance policy does not have a war clause. If the insured is killed during a time of war, what will the beneficiary receive from the policy? a)Nothing, since the insured was killed as a result of a war b)The full death benefit c)The policy's cash value d)A refund of premiums

b)The full death benefit War or Military Service Clause specifically excludes or limits the insurer's liability for losses caused by war or active military service. If a life insurance policy does not have that exclusion, the benefits are paid to the beneficiary, as if the insured died of any other cause.

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)Habits. b)Prior insurance. c)Ancestry. d)Credit history.

c)Ancestry. The Fair Credit Reporting Act regulates what information may be collected and how the information may be used. Consumer Reports include written and/or oral information regarding a consumer's credit, character, reputation, and habits collected by a reporting agency from employment records, credit reports, and other public sources. Ancestry is not a relevant factor assessed in these reports.

In the Executive Bonus plan, who is the owner of the policy, and who pays the premium? a)Board of directors is the owner, and the board of directors pays the premium. b)Company is the owner, and the company pays the premium. c)Executive is the owner, and the executive pays the premium. d)Company is the owner, but the executive pays the premium.

c)Executive is the owner, and the executive pays the premium. Executive buys the policy and pays the premium, and the employer reimburses the executive for cost (or pays a bonus in the amount of the premium). Since the executive is receiving compensation, the amount paid by the employer would be considered taxable income.

What effect do accelerated benefits have on the life policy's death benefit? a)Double the death benefit b)No effect c)Reduce the death benefit d)Increase the death benefit

c)Reduce the death benefit The payment of accelerated benefits reduces the policy's death benefit.

An employee has group life insurance through her employer. After 5 years, she decides to leave the company and work independently. How can she obtain an individual policy? a)She can only convert her coverage without proof of insurability if she has the master policy. b)She must apply for a new policy, which requires her to provide proof of insurability. c)She can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan. d)She will still be covered under the group plan, but will have to pay an individual policy premium.

c)She can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan. If a person has life insurance under a group plan and then leaves the group, he/she may convert group coverage to individual coverage within 31 days of leaving the plan without proof of insurability.

Which of the following information will be stated in the consideration clause of a life insurance policy? a)The time period allowed for the payment of premium b)The conditions for insurability c)The amount of premium payment d)The parties to the contract

c)The amount of premium payment The consideration clause states that the value offered by the insured is the premium and statements made in the application, so it will include the information about the amount and frequency of premium payments.

All of the following statements about equity index annuities are correct EXCEPT a)The interest rate is tied to an index such as the Standard & Poor's 500. b)They invest on a more aggressive basis aiming for higher returns. c)The annuitant receives a fixed amount of return. d)They have a guaranteed minimum interest rate.

c)The annuitant receives a fixed amount of return. Equity indexed annuities have a guaranteed minimum interest rate, so while they are aggressive in nature, the annuitant will not have to worry about receiving less than what the minimum interest rate would yield.

If an insurer requires a medical examination of an applicant in connection with the application for life insurance, who is responsible for paying the cost of the examination? a)The examiner b)The applicant c)The insurer d)The cost of the examination will be waived.

c)The insurer During the underwriting process, an insurer may require that an applicant receive a medical examination. The insurer is responsible for the associated costs of the examination.

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

c)To purchase a smaller amount of the same type of insurance as the original policy. The dividends are used to purchase a single premium policy in addition to the face amount of the permanent policy.

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

c)To purchase a smaller amount of the same type of insurance as the original policy. The dividends are used to purchase a single premium policy in addition to the face amount of the permanent policy.

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 must pay interest to the insurer. b) The beneficiary will receive the lump sum, plus interest. c) The primary beneficiary will receive the death benefit and the secondary beneficiaries will share the interest payments. d) The beneficiary will only receive payments of the interest earned on the death benefit.

d) The beneficiary will only receive payments of the interest earned on the death benefit.

What percentage of a company's employees must take part in a noncontributory group life plan? a)0% b)25% c)75% d)100%

d)100% If the employer pays all of the premium, all employees must be covered to avoid adverse selection.

When advertising a product, an insurer cannot use words or symbols that would be associated which what type of agency? a)Federal government b)State government c)Stock d)A & B

d)A & B When advertising a product, an insurer cannot use words or symbols similar to those of a governmental agency.

According to the Replacement Rule, replacement of life insurance is defined as a process in which a)An Ordinary Life policy is converted to a Universal Life policy. b)Term insurance is changed to a Whole Life policy. c)A lapsed policy is reinstated within a specific timeframe. d)A new policy is bought and an old policy is converted to a Reduced Paid-up policy.

d)A new policy is bought and an old policy is converted to a Reduced Paid-up policy. Replacement means any transaction in which new life insurance is to be purchased and the proposing producer knows that by reason of the transaction, existing life insurance will be converted to reduced paid-up insurance, continued as extended term insurance or otherwise reduced in value by the use of nonforfeiture benefits or other policy values.

Which of the following determines continuing education biennium due date? a)Agent's licensing year b)Agent's last name c)Agent's license number d)Agent's year of birth

d)Agent's year of birth Biennial due date means the date of birth of any licensed insurance agent who is required to complete CE credits. Agents born in odd-numbered years will complete their CE requirements every odd-numbered year; agents born in even-numbered years will complete their CE credits every biennium in even-numbered years.

Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?a)Term insurance only b)Permanent insurance only c)Universal life insurance only d)Any form of life insurance

d)Any form of life insurance Any form of Life insurance may be used to fund a buy-sell agreement.

All of the following statements concerning dividends are true EXCEPT a)Lower insurance company costs generate higher dividends. b)They stem from favorable underwriting experience. c)Favorable investment results generate higher dividends. d)Dividend amounts are guaranteed in the policy.

d)Dividend amounts are guaranteed in the policy. Dividends cannot be guaranteed.

The purpose of the Life Insurance Guaranty Association is to a)Encourage Life insurers to write substandard business. b)Allow producers to continue to solicit insurance, even if the company they represent is financially impaired. c)Protect the reputation of the Insurance Department if they issue a Certificate of Authority to a company that becomes insolvent. d)Help protect policyowners and beneficiaries against financial loss caused by the insolvency of an insurance company.

d)Help protect policyowners and beneficiaries against financial loss caused by the insolvency of an insurance company. All admitted insurers must be a member of the Insurance Guaranty Association as a condition of their license. The Insurance Guaranty Association is in existence to protect policyowners and beneficiaries against losses caused by the insolvency of an insurance company.

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 premiums will become tax deductible until the insured's 18th birthday. 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. d)The insured's premiums will be waived until she is 21.

d)The insured's premiums will be waived until she is 21. If the payor (usually a parent or guardian) becomes disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches a certain age, such as 21.

The policyowner of a Universal Life policy may skip paying the premium and the policy will not lapse as long as a)The previous premium payments were high enough to create an excess of premium. b)The policyowner cannot skip premiums without the policy lapsing. c)The next month's premium is sufficient to cover both the current premium amount and the skipped amount. d)The policy contains sufficient cash value to cover the cost of insurance.

d)The policy contains sufficient cash value to cover the cost of insurance. In Universal Life Insurance, the policyowner may skip a premium payment without lapsing the policy as long as the policy contains sufficient cash value at the time to cover the cost of insurance for that premium period.

All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT a)Any type of insurance policy may be used. b)The employer pays a bonus to a selected employee to fund the policy. c)It is considered a nonqualified employee benefit. d)The policy is owned by the company.

d)The policy is owned by the company. The policy is owned by the employee.

Which of the following statements is correct regarding a whole life policy? a)Cash values are not guaranteed. b)The policy premium is based on the attained age. c)The death benefit may increase or decrease during the policy period. d)The policyowner is entitled to policy loans.

d)The policyowner is entitled to policy loans. Whole life policies offer level premium based on the issue age, guaranteed, level death benefit, cash value that is scheduled to equal the face amount at the insured's age 100, and living benefits, which include policy loans.