Insurance test 1

Why is an equity indexed annuity considered to be a fixed annuity?

It has a guaranteed minimum interest rate.

All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT

It is a life contingency option.

An applicant for insurance misstates her age at the time her life insurance application is taken. This misstatement may result in

Adjustment in the death benefit

Which of the following would NOT be considered an insurance producer?

An insurer's officer

When must agents submit license renewal applications to the Superintendent?

At least 60 days before the license expires

Who makes up the Medical Information Bureau?

Insurers

Which of the following statements regarding HIV testing for life insurance purposes is NOT true?

Insurers are barred from requesting HIV testing.

A couple receives a set amount of income from their annuity. When the wife dies, the husband no longer receives annuity payments. What type of annuity did the couple buy?

Joint Life

Variable Whole Life insurance is based on what type of premium?

Level fixed

An agent in another state wants to become an agent in New York. The other state gives the same privileges to New York agents wanting to be licensed in that state as it does its own agents. New York, therefore, extends the privileges of its agents to the prospective agent of the other state. What is this called?

Reciprocity

The initial amount of credit life insurance may NOT exceed

The amount to be repaid under the contract

Which of the following would least likely be considered a legitimate need that would be paid by insurance proceeds?

Vacation travel expenses

The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called

Waiver of Premium

When would a 20-pay whole life policy endow?

When the insured reaches age 100

Which of the following is the basic source of information used by the company in the risk selection process?

application

When doing business in this state, an insurance company that is formed under the laws of another state is known as which type of insurer?

foreign

What provision in an insurance policy extends coverage beyond the premium due date?

grace period

What is the tax consequence of amounts received from a Traditional IRA after the money was left in the tax-deferred account by the beneficiary?

income tax on distributions and no penalty

Who does the agent represent?

insurance company

What is the other term for the cash payment settlement option?

lump sum

For the purpose of insurance, risk is defined as

the uncertainty or chance of loss

An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement?

$200,000

All of the following are true about the Insurance Frauds Prevention Act EXCEPT

Every insurer must file a fraud prevention plan within 150 days.

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?

Interest only option

Which of the following best describes annually renewable term insurance?

It is level term insurance

Which of the following would provide an underwriter with information concerning an applicant's health history?

Medical Information Bureau

A participating insurance policy may do which of the following?

Pay dividends to the policyowner

Pertaining to insurance, which of the following is an example of a producer's fiduciary responsibility?

Promptly forwarding premiums to the insurance company

What is the primary purpose of a 401(k) plan?

Provide retirement income

Which nonforfeiture option provides coverage for the longest period of time?

Reduced Paid-Up

The Federal Fair Credit Reporting Act

Regulates consumer reports

Which of the following would help prevent a universal life policy from lapsing?

Target premium

All of the following are TRUE statements regarding the accumulation at interest option EXCEPT

The interest is not taxable since it remains inside the insurance policy.

All of the following are general requirements of a qualified plan EXCEPT

The plan must be temporary

Which of the following is NOT a characteristic of variable annuities?

They offer guaranteed stock performance.

All of the following are true regarding the guaranteed insurability rider EXCEPT

This rider is available to all insureds with no additional premium.

What process do insurance companies use to determine whether or not a particular applicant is insurable?

Underwriting

Which of the following types of policies allows the policyowner to skip premium payments, provided that there is enough cash value in the policy to cover the premium amount?

Universal Life

All of the following information about a customer must be used in determining annuity suitability EXCEPT

beneficiary's age

All of the following are personal uses of life insurance EXCEPT

buy-sell agreement

What limits the amount that a policyowner may borrow from a whole life insurance policy?

cash value

In a case where the primary beneficiary predeceases the insured, in the event of the insured's death, the death benefit proceeds will be paid to

contingent beneficiary

An individual has been making periodic premium payments on an annuity. The annuity income payments are scheduled to begin after 1 year since the annuity was purchased. What type of annuity is it?

deferred

Which of the following terms is used to name the nontaxed return of unused premiums?

dividend

All of the following are examples of risk retention EXCEPT

premiums

. A domestic insurer issuing variable contracts must establish one or more

separate accounts

Which of the following is called a "second-to-die" policy?

survivorship life

Who is the owner and who is the beneficiary on a Key Person Life Insurance policy?

the employer is the owner and beneficiary

Traditional IRA contributions are tax deductible based on which of the following?

Owner's income

A Universal Life insurance policy has two types of interest rates that are called

Guaranteed and current

An individual purchased a $100,000 Joint Life policy on himself and his wife. Eight years later, he died in an automobile accident. How much will his wife receive from the policy?

$100,000

#86. An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy?

$50,000

The law states that an insurer is allowed to pay the entire Death Benefit to the insured if they qualify to use the Accelerated Death Benefit Rider; however, most insurers limit the amount of the Death Benefit paid to

50%

Which of the following is NOT an allowable 1035 exchange?

A whole life insurance policy is exchanged for a term insurance policy

If a beneficiary is NOT named for annuity benefits, to which entity will the benefit be paid?

Annuitant's estate

An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his

Attained age

All of the following statements are correct regarding credit life insurance EXCEPT

Benefits are paid to the borrower's beneficiary.

What does "level" refer to in level term insurance?

Face amount

All agents, brokers, and reinsurance intermediaries have a/an

Fiduciary responsibility to their clients.

The person who, for compensation, solicits, negotiates, or offers to negotiate a life settlement contract is the

Life settlement broker.

An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it?

Limited-Pay Life

An applicant who receives a preferred risk classification qualifies for

Lower premiums than a person who receives a standard risk.

Which of the following is NOT considered a misrepresentation as it pertains to unfair trade practices?

Making comparisons between different policies

Under a straight life annuity, if the annuitant dies before the principal amount is paid out, the beneficiary will receive

Nothing; the payments will cease.

A rider attached to a life insurance policy that provides coverage on the insured's family members is called the

Other-insured rider

Which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy?

Owner's Rights

All of the following statements about equity index annuities are correct EXCEPT

The annuitant receives a fixed amount of return

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then

The benefit is received tax free

The annuity owner dies during the accumulation period without naming a beneficiary. Annuity's cash value exceeds premiums paid. Which of the following is TRUE?

The cash value will be paid to the annuitant's estate

When a fixed annuity owner pays a monthly annuity premium to the insurance company, where is this money placed?

The insurance company's general account

An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT?

The insured may choose to convert to term or permanent individual coverage.

All of the following are true of an annuity owner EXCEPT

The owner must be the party to receive benefits.

An individual applies for a life policy. Two years ago he suffered a head injury from an accident, so he cannot remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history one year later. What will probably happen?

The policy will not be affected.