Insurance
Lloyds of London
not an insurer, but a society of members who underwrite insurance in syndicates
the investment gains from a universal life policy usually go toward
the cash value
When does a life insurance contract become effective if the initial premium is not collected during the application process?
when producer collects initial premium and delivers policy
An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?
when the conditions of the receipt are met
K pays on a $20,000 20-year endowment policy for 10 years and dies in a car accident. How much will the insurance company pay the beneficiary
$20,000 death benefit
which statement is true regarding a minor beneficiary
normally, a guardian is required to be appointed in the beneficiary clause of the contract
If a producer chooses to conduct business under an assumed name, when must notification be given to the Commissioner?
prior to using the assumed name
an immediate annuity consists of a
single premium
Colorado's replacement rules apply to all of the following types of insurance EXCEPT
single premium whole life
if an annually application was not taken in person, an insurer must provide the applicant a Buyers Guide
within 5 business days of the insurer receiving the application
A producer must remit premiums to the insurer within ___ days after receipt.
45
Three law partners from a Cross-Purchase Buy and Sell agreement. This agreement is funded with individual life insurance. How many total life policies are needed for this agreement
6
contestable period
A period during which an insurer can challenge the validity of a life insurance policy, by reviewing coverage for any misrepresentation during application process.
C is a key employee at ABC Incorporated. If a key employee life policy is purchased on her life, which of these statements would be true?
ABC is the policyowner, C is the insured, and ABC is the beneficiary
what is not true about underwriting process
AIDS and HIV exams can be conducted in a discriminatory fashion
a policy loan is made possibly by which of these life insurance policy features?
Cash value provision
Which of the following documents are NOT required to mention the Co Fraud Statute
Certificate of authority
From what point must the insurer pay interest on the proceeds of a death claim?
Date of death
How are Roth IRA distributions normally taxed?
Distributions are received tax-free
Incontestability Clause
Ensures insurance company cannot contest statements made in insurance application after certain period of time
Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". How can this be interpreted?
If toms employment is terminated, 20% of the funds would be forfeited
Why must an insurance applicant answer all questions on the applications
Statements and representations on the application are part of the consideration for issuing a policy
Which of the following statements regarding the Notice Regarding Replacement of Life Insurance is CORRECT
a copy of the notice must be reviewed and signed by both the policy applicant and beneficiary
when a minor is designated as the sole primary beneficiary,
a guardian will be court-appointed in the event of a death claim
The incontestable clause allows an insurer to
contest a claim during the contestable period
which of these require an offer, acceptance, and consideration?
contract
which statement regarding the misstatement of age provision is considered to be true
coverage will be adjusted to reflect the insured's true age if a misstatment of age is discovered
Credit life insurance is typically issued with which of the following types of coverage
decreasing term
S is close to retiring and would like to purchase a policy that will yield greater gains than bonds, but will still protect the principal with a minimum level or risk. Which product would S be advised to purchase?
equity index insurance
When an insurer issues a policy that refuses to cover certain risks, this is referred to as a
exclusion
A universal life policy is sometimes referred to as an unbundled life policy because the owner can see the interest earned, cost of insurance, and the
expense charges
which of the following nonforfeiture options offers the highest death benefit
extended term
which of the following offers an insurance applicant the right to review the contract and receive a full refund
free-look period
D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary's receive?
full face amount
A nonforfeiture clause gives the policyowner
guaranteed values even if the policy has lapsed
paying insurance premiums on a more frequent basis will causes the policy to have
higher premiums
When may the Commissioner issue an emergency cease and desist order?
if there is suspicious of an unauthorized person engaging in insurance business without being licensed
W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices except:
immediate annuity
when must insurable interest exist for a life insurance contract to be valid?
inception of the contract
a policy of adhesion can only be modified by whom
insurance company
Employer noncontributory group life policies must allow for all of the following EXCEPT
insured can determine the benefit amount
if the insured and primary beneficiary are both killed in the same accident and it cannot be determined who died first, where are the death proceeds to be directed under the uniform simultaneous death act
insured's contingent beneficiary
which of these needs is satisfied by adjustable life insurance
insured's need for flexible premiums
How are the policyownder dividends treated in regards to income tax?
interest on accumulations is taxed
to be valid, a group life insurance policy
may not be issued to a group formed solely for the purpose of obtaining insurance
A producer license may be suspended or revoked if the producer is found to be engaging in
misrepresentation
a policyower is allowed to pay premiums more than once a year under which provision
mode of premiums
which of these products is not considered interest sensitive
modified whole life
T is covered by an Accidental Death and Dismemberment (AD&D) policy that has an irrevocable beneficiary. What action will the insurance company take if T requests a change of beneficiary?
request of the change will be refused
What is the suicide provision designed to do
safeguard the insurer from an applicant who is contemplating suicide
S recently received a $500,000 lump sum retirement buyout from her employer. She would like to buy an annuity that will immediately furnish her with a guaranteed income for life. What type of annuity is best suited for her situation
single premium
What type of life policy covers two people and pays upon the death of the last insured
survivorship
A life policy with a death benefit and cash value that can fluctuate according to the performance of its underlying investment portfolio is referred to as:
variable life
Term Life Policies that have the ability to be converted to permanent coverage may do so during a specific time period. This conversion period
varies according to the contract
the commissioner may issue an emergency cease and desist order without a hearing for all the following except
writing controlled business
Which of the following is an example of defamation
A brochure including an untrue statement regarding a competitor's ability to pay claims
what is the max amount the commissioner can fine an insurer for each violation of a cease and desist order
$10,000
___ of personal life insurance premiums is usually deductible for federal income tax purposes
0%
all of the following statements about traditional individual retirement accounts are false EXCEPT
10% penalty is applied to withdrawals before age 50.5
In Colorado, a life insurance applicant has ____ days after policy delivery for a full refund of premium if not satisfied for any reason
15
Before a life policy is issued, which of these contract elements is necessary
a signed application by the prospect
cost of living rider gives the insured
additional death benefits
B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of
additional whole life coverage at specified times
The amount of monthly disability benefits payable under social security is affected by whihc of the following factors
amount of benefits available from other sources
which premium schedule results in the lowest cost to the policyowner
annual
group life insurance policies are generally written as
annually renewable term
When does a Guaranteed Insurability Rider allow the insured to buy additional coverage?
at future dates specified in the contract with no evidence of insurability required
the automatic loan premium provision is designed to
avoid a policy lapse
K owns a whole life policy. If K wants an increasing death benefit to protect against inflation, which dividend option should she chose?
paid-up additional insurance
which statement is TRUE in regards to a policy loan
past due interest on a policy loan is added to the total debt
all of the following statements are true regarding a policys grace period except
past due premiums are waived
what is true in regards to policy loans
past-due interest on a policy loan is added to the total debt
which of the following provisions guarantees that premiums will be waived if a Juvenile Life policyowner becomes disabled
payor clause
Which of these characteristics is consistent with a Straight life policy?
premiums are payable for as long as there is insurance coverage in force
P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year period. What type of policy should P purchase?
Family maintenance policy
which of the following potential insurance sales would be subject to replacement regulations
a new policy that causes an existing life insurance policy to be surrendered
Who is not eligible to receive commissions from the sale of an insurance product
corporate executive
When is it appropriate for a producer's spouse to be the primary beneficiary on an applicants life insurance policy
when insurable interest exists
what type of insurance offers permanent life coverage with premiums that are payable for life
whole life
a return of premium life insurance policy is
whole life and increasing term
K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however, the check was never signed by the applicant. If the application is approved, when will coverage be effective?
the date the agent delivered the policy, collected the initial premium and obtained a good health statement from the insured
what is the underlying concept regarding level premiums
the early years are charged more than what is needed
which of the following statemetns regarding the notice regarding replacement of life insurance is correct
a copy of the notice must be signed by the applicant and submitted with the application
indemnify
compensate for loss, damage, or injury; reimburse; repay
Which information is NOT included in the Co supplement to the summary of benefits and coverage form?
insurer's prior year financials
Q applied for life insurance and submitted the initial premium on Jan 1. The policy was issued Feb 1, but it was not delivered by the agent until February 7. Q is dissatisfied and returns the policy Feb 13. How will the insurer handle this situation
policy was returned within the free look period and premium will be fully refunded
the ______ is authorized to assign a life insurance policy as collateral for a loan
policyowner
what is the basic function of an annuity
the systematic liquidation of accumulated funds
An insurer cannot deny a claim unless
there is a reasonable explanation of the claim
an producer who violates a cease and desist order may, after a hearing, be fined up to
$500
how long must a replacing insurer maintain the records of a replacement transaction?
5 years
what is the purpose of a policy summary
It highlights the critical parts of the policy issued
Which statement regarding third party ownership of a life insurance policy is true?
It is extensively in estate-planning as well as business circumstances
Stranger Owned Life Insurance (STOLI)
a large policy acquired by a group of investors with the specific intention of selling the policy in the secondary life insurance market and ultimately making a substantial profit when the insured dies
which of the following statements is correct regarding insurable interest in a life insurance contract
a persons generally is considered to have an unlimited insurable interest in himself or herself
Which of the following is CORRECT regarding a producers fiduciary responsibility with client funds?
a producer may never commingle personal funds paid by or to a client
what action will an insurer take if an interest payment ona policy loan is not made on time
automatically add the amount of interet due to the loan balance
A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following?
aviation exclusion
the automatic premium loan provision is desgined to
avoid a policy lapse
whose life is covered on a life insurance policy that contains a payor benefit clause
beneficiary
Variable Whole Life Insurance can be described as
both an insurance and securities product
How are surrender charges deducted in a life policy with a rear-end loaded provision
deducted when the policy is discontinued.
Variable annuities may invest premiums in each of the following EXCEPT
insureres corporate business account
in a life insurance contract, an insurance companys promise to pay stated benefits is called the
insuring clause
which type of insurance beneficiary require his/her consent when a change of beneficiary is attempted by the policyowner
irrevocable beneficiary
When a claim has been denied, the insurer must
issue a statement to the policyowner explaining the coverage, provision, or laws on which denial was based
In CO, which of the following is true regarding the commingling of an insured fund with the funds of the producer
it is never ok
K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable?
level
A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the
policy loan provision
which statement is correct regarding the premium payment schedule for the whole life policies
premiums are payable throughout the insured lifetime/coverage lasts until death of the insured
which of the following actions is NOT possible with a universal life policy
premiums may be applied as a credit against income tax
Nonforfeiture Options
provision included in certain life insurance policies saying that the policyholder will not forfeit the value of the policy if the policy lapses after a defined period of time due to nonpayment
All of these are considered sources of underwriting information about an applicant EXCEPT
rating services
which of the following is required for a life insurance Lapse notice
reason stated why the policy will lapse
if a producer offers to refund part of a prospects premium in exchange for the purchase of a life insurance policy, the producer is committing the illegal act of
rebating
Which of the following is an example of a nonforefeiture option?
reduced paid up option
A statement made by an insured in an insurance application that must be true to the best of one's knowledge and which becomes a part of the contract is known as
representation
Interest on life insurance proceeds is
required if the claim was not paid within 30 days of the date insurer received the claim
what is an example of rebating
returning a portion of a premium as inducement to purchase insurance
The consideration clause in a life insurance policy indicates that a policyowners consideration consists of a completed application and
the initial premium
the amount of coverage on a group credit life policy is limited to
the insured's total loan value
level premium indicates
the premium is fixed for the entire duration of the contract
under a renewable term policy
the renewal premium is calculated on the basis of the insured attained age
which of the following statements is true regarding the replacement of a life insurance policy in Colorado
the replacing insurer must maintain copies of all records regarding replacement for 5 years
an individual who purchases a life annuity is given protection against
the risk of living longer than expected
insolvent
unable to pay debts owed
A variable annuity has which of the following characterisics
underlying equity investments
In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?
unilateral
A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached
waiver of premium
On June 1, 2004, G takes out a $20,000 whole life insurance policy with an accidental death and disemberment rider. On July 15, 2005 G intentionally overdoses on sleeping pills and takes her own life. What will G's beneficiary receive as a death benefit
$20,000
what kind of insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability
convertible term
A whole life insurance policyowner does not wish to continue making premium payments. Which of the following enables the policyowner to set the policy for more than its cash value
life settlement contract
The premium paid by an employer for his employee's group life insurance are usually considered to be
tax-deductible to the employer
T cash surrenders a recently-issued whole life policy. He also requests that the proceeds be payable to an unrelated third party. T would likely be red-flagged for violation of
anti-money laundering rules
A life insurance applicant realized he failed to disclose material medical history and calls the producer. Any changes made to the application must be initialed by the
applicant
The accidental death and dismemberment provision in a life insurance policy would pay additional benefits if the insured
became blinded in an accident
which of these is NOT considered to be a cost connected with an individuals death
business expense
Company XYZ offers a group Term Life insurance plan to its employees. What does each employee covered under this plan receive?
certificate of insurance
all of the following are considered a form of advertisement EXCEPT
communication or materials used within a insurer's own organization
which of the following is NOT a problem when existing life insurance is replaced with new coverage
comprehensive coverage may increase under the new policy
which of these is NOT a source of funding for social security benefits
federal government
all of these statements about the waiver of premium provision are correct EXCEPT
insured must be eligible for social security disability for claim to be accepted
Which of these is NOT an element of Life insurance premiums
morbidity rate
What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100
whole life
upon request, when must the Colorado Supplement to the SUmmary of benefits and coverage form be provided
within 7 business days
a company that has not been authorized to operate in Colorado is known as a
nonadmitted insurer
What type of life insurance are credit policies issued as?
term
K applies for a life insurance policy on herself and submits the initial premium with the application. She is given a receipt by the agent stating that coverage begins immediately if the application is approved. What kind of receipt was used?
conditional
T purchased a $100,000 single premium, Straight Life annuity 5 years ago. He has received monthly payments since the inception of the annuity. If T dies, the insurance company
does NOT have to pay any further payments
Whole life insurance is sometimes referred to as "straight life". what does the word "straight" indicate when using this phrase
duration of premium payments
Which of the following is an important underwriting principle of group life insurance?
everyone must be covered in the group
which of these statements describe a Modified Endowment Contract
exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract
The underwriting process involves all of these except
policy loan
if a producer is going to deposit any premium into a bank account prior to remitting the funds to the insurer, he/she must use a
separate insurance trust account
typically a life insurance death benefit is paid by a lump-sum payment. An _____ option is a method of distributing a life insurance policy's death benefit OTHER than by a lump sum payment
settlement
which of the following life insurance policies combine term insurance with an investment element
universal life
life insurance immediately creates an estate upon the death of an insured. Which of the following policies is characterized by a guaranteed minimum death benefit
variable life
S owns a life insurance policy with cash values that fluctuates according to the underlying investment performance of common stocks. Which of these policies does S own
variable whole life
when a misrepresentation on a life insurance policy application is discoered, what action may a insurance company take
void the policy only if it is discovered during the contestable period and proven to be material
The part of a life insurance policy guaranteed to be true is called
warranty
which parts of a life insurance policy are guaranteed to be true
warranty
which of the following statements about accumulated interest earned on divendends from an insurance policy is true
taxed as ordinary income
Which of the following is TRUE if the owner of an IRA names their spouse as beneficiary, the then dies before any distributions are made
the account can be rolled into the surviving spouses IRA
which of the following statements is correct about an agent who is taking an insurance application
the agent should have the applicant initial any changes made on the application
surplus
the amount of an asset or resource that exceeds the portion that is utilized
If a producer is found to be writing primarily controlled business,
the commissioner will not renew the license
All of the following statements regarding a tax sheltered annuity (TSA) are true except
Income derived from the TSA is received income tax-free
all of these concepts about equity indexed life insurance are correct EXCEPT
The premiums can be lowered or raised, based on investment performance
T applies for a life insurance policy and is told by the producer that the insurer is bound to the coverage as of the date of the application or medical examination, whichever is later. Assuming that T is an acceptable risk, what item is given to T?
conditional receipt
T is given a receipt after completing a life insurance application and paying the initial premium. Under this situation, T's coverage is
conditional, depending on the insurer's underwriting guidelines
A 45-year old women won $100,000 in a scratch off lottery ticket. She purchased an annuity that will pay her $1500 per month beginning at age 60. Which of these annuities did this women purchase
deferred fixed annuity
the common disaster clause provides that if both the insured and the sole named beneficiary were to die in a common accident, which of the following is true
this clauses provides the payment of proceeds ot the insured's estate
The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured original age is
to cost
K purchased a Life insurance policy in 1986 which paid 10% interest in the early years of the policy. Twenty years after the purchase, she received a notice from the insurer stating that the policy will soon terminate unless a much-higher premium is paid because of falling interest rates. This type of policy is known as a(n) _________ life policy.
universal
What type of life insurance incorporates flexible premiums and an adjustable death benefit?
universal life
what type of life insurance incorporates flexible premiums and an adjustable death benefit
universal life
when funds are shifted straight form one IRA to another IRA, what percentage of the tax is withheld
none
upon delivery of a rated life insurance policy, the producer must obtain each of the following EXCEPT
signed HIPPA disclosure
what is an example of a misrepresentation
describing a universal policy as a security
When recommending the purchase or exchange of an annuity, a producer must determine the suitability of the purchase by performing all of the following except
determining the marital status of the applicant
P has recently signed an application for insurance. The insurer MUST advise her in writing that an investigative consumer report may be conducted according to the
fair credit reporting act
T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this?
life annuity with period certain
A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision
payor provision
Insurance policies are considered aleatory contracts because
performance is conditioned upon a future occurance
The consideration clause of an insurance contract includes:
the schedule and amount of premium payments
Stranger-Owned Life Insurance (STOLI) is when a person purchases life insurance only to sell to an
third party with no insurable interest