LAH Insurance exam

Question Type- Insurance Regulation What is it called when an agent offers compensation to an applicant in exchange for business? A. Fraud B. Waiver of premium C. Twisting D. Rebating

D. Rebating Offering compensation to an applicant in exchange for business is known as rebating.

Question Type- Insurance Regulation Which of the following is not a prerequisite for an insurance license in NY? a. Be a state resident on the date of application b. Pass the required examination c. Be at least 21 years of age d. Complete prelicensing education

c. Be at least 21 years of age

Question Type- Life Insurance Policies Which type of life insurance policy generates immediate cash value? A. Single Premium B. Level Term C. Decreasing Term D. Continuous Premium

A. Single Premium correct! Like other types of whole life policies, Single Premium Whole Life (SPWL) endows for the face amount of the policy if the insured lives until the age of 100. The distinguishing feature of a SPWL is the fact that it generates immediate cash value, due to the lump-sum payment made to the insurer.

Question Type- Life Insurance Policies All of the following entities regulate variable life policies EXCEPT A. The Guaranty Association. B. Federal government. C. The SEC. D. The Insurance Department.

A. The Guaranty Association. correct! Variable life insurance is regulated by both the state and federal government, as well as the Insurance Department, and the SEC.

Question Type- Life Insurance Policy Provisions, Options and Riders Which entity determines the amount of accelerated death benefits that will be paid to an insured? A. The insurer B. Employers offering plans that include accelerated death benefits C. Federal law D. State law

A. The insurer correct! The law stipulates that up to 100% of death benefits can be paid in advance, but it is legal for individual insurers to decide the maximum amount of accelerated death benefits that they will pay.

Question Type- Health Insurance Basics On a health insurance application, a signature is required from all of the following individuals EXCEPT A. The spouse of the policyowner. B. The proposed insured. C. The policyowner. D. The agent.

A. The spouse of the policyowner. Correct! Every health insurance application requires the signature of the proposed insured, the policyowner (if different than the insured), and the agent who solicits the insurance.

Question Type- Health Insurance Basics Which of the following statements regarding conditional receipts is true? A. They are temporary insuring agreements. B. They guarantee the insurer will approve the application. C. They purchase temporary insurance, up to 6 months. D. They become part of the policy.

A. They are temporary insuring agreements. correct! With a conditional receipt, insurance coverage is effective as of the date of the receipt, so long as the application is approved.

Question Type- Life Insurance Policy Provisions, Options and Riders An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have? A. Universal life B. Adjustable life C. Term life D. Limited pay

A. Universal life Correct! Universal Life policies allow for policyholders to withdraw a limited portion of the policy's cash value. Each withdrawal, however, is usually charged, and the amount and frequency of withdrawals are usually limited.

Question Type- Life Insurance Policy Provisions, Options and Riders The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been in force for at least how many years? A. 1 year B. 2 years C. 5 years D. 7 years

B. 2 years Correct! The incontestability clause prevents an insurer from denying a claim due to statements in the application after the policy has been in force for 2 years, even if there has been a material misstatement of facts or concealment of a material fact.

Question Type- General Insurance When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is A. Conditional. B. Aleatory. C. Personal. D. Unilateral.

A. Conditional. The contract is formed on the basis that certain conditions are met.

Question Type- Insurance Regulation The New York Superintendent has the responsibility to make sure each entity transacting insurance in this state remains solvent. Insurers are required to file a statement with the Superintendent A. Semiannually on or before January and June 1st. B. Every 2 years by the renewal date. C. Annually on or before March 1st. D. Biannually on or before April 1st.

C. Annually on or before March 1st. Each entity must file a statement with the Superintendent annually on or before March 1st.

Question Type- Life Insurance Policy Provisions, Options and Riders Which nonforfeiture option has the highest amount of insurance protection? A. Extended Term B. Conversion C. Decreasing Term D. Reduced Paid-up

A. Extended Term correct! The Extended Term nonforfeiture option has the same face amount as the original policy, but for a shorter period of time.

Question Type- Life Insurance Basics Attempting to determine how much insurance an individual would require based upon their financial objectives is known as A. Needs approach. B. Human life value approach. C. Estate planning. D. Viatical approach.

A. Needs approach. correct! Needs method determines how much benefit would be necessary to replace the loss income and increased expense should the insured die prematurely.

Question Type- Life Insurance Policy Provisions, Options and Riders 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 correct! 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.

Question Type- Health Insurance Basics Which of the following is true regarding health insurance? A. It provides death benefit coverage. B. It only covers expenses related to health care. C. It could provide payments for loss of income. D. Disability coverage is excluded.

C. It could provide payments for loss of income. correct! Health insurance is a generic term, encompassing several types of insurance contracts, which, though related, are designed to protect against different risks. It provides coverage for expenses related to health care, loss of income, and disability income.

Question Type- Life Insurance Policies A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that? A. Second-to-Die B. Family Income Policy C. Joint Life Policy D. Survivorship Life Policy

C. Joint Life Policy correct! Joint life policies cover the lives of two insureds; rates are blended. Upon the death of the first insured, the policy ends.

Question Type- Insurance Regulation According to the Insurance Frauds Prevention Act, will the person who suspects a fraudulent transaction be penalized for reporting it to the Superintendent? A. Each person who reports to the Superintendent will receive a monetary reward. B. No; in no case may the person be penalized. C. Yes D. No, as long as the act is reported in good faith

D. No, as long as the act is reported in good faith As long as the suspected fraudulent transaction was reported in good faith, no civil liability will be placed against the person who reported it.

Question Type- Annuities Which of the following best describes what the annuity period is? A. The period of time from the accumulation period to the annuitization period B. The period of time during which money is accumulated in an annuity C. The period of time from the effective date of the contract to the date of its termination D. The period of time during which accumulated money is converted into income payments correct! The annuity period is the time during which accumulated money is converted into an income stream.

D. The period of time during which accumulated money is converted into income payments. correct! The annuity period is the time during which accumulated money is converted into an income stream.

Question Type- General Insurance When an individual purchases insurance, what risk management technique is he or she practicing? A. Avoidance B. Sharing C. Retention D. Transfer

D. Transfer Correct! Insurance is a transfer of the risk of financial loss from a covered peril from the insured to the insurance company.

Question Type- Life Insurance Policy Provisions, Options and Riders The Waiver of Cost of Insurance rider is found in what type of insurance? A. Whole Life B. Joint and Survivor C. Juvenile Life D. Universal Life

D. Universal Life Correct! The Waiver of Cost of Insurance rider is found in Universal Life policies. If the insured becomes disabled, the rider allows the cost of insurance to be waived, with the exception of premium costs required to accumulate cash value.

Question Type- Insurance Regulation Which of the following persons is required to hold a producer license? A. A person who negotiates insurance contracts B. A person who creates insurance advertisements C. A person who takes messages related to claims D. A person who administers employee benefits

A. A person who negotiates insurance contracts Persons who perform clerical tasks that are not related to soliciting or negotiating insurance contracts are not required to be licensed.

Question Type- General Insurance What documentation grants express authority to an agent? A. Agent's contract with the principal B.Agent's insurance license C. Fiduciary contract D. State provisions

A. Agent's contract with the principal The principal grants authority to an agent through the agent's contract.

Question Type- Insurance Regulation How long must insurers keep records of claims? A. 3 years B. 4 years C. 5 years D. 6 years

D. 6 years Correct! Insurers must keep records for at least 6 years or until the filing of a review of the record, whichever is longer.

Question Type- Insurance Regulation The continuing education (CE) requirement in this state: A. Applies to life, annuity, and accident and health licensees only. B. Consists of completing 15 hours of continuing education each biennium. C. Allows agents to carry over excess CE hours to the next licensing period as long as it's for the same license. D. Cannot be extended or waived under any circumstances.

Correct! All agents (unless otherwise exempt) must complete 15 hours of continuing education every 2 years in order to renew a license. B. Consists of completing 15 hours of continuing education each biennium.

Question Type- Life Insurance Policy Provisions, Options and Riders Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium? A. Extended term B. Reinstatement C. Reduced paid-up option D. Automatic premium loan

D. Automatic premium loan correct! Automatic premium loan provision is not required, but is commonly added to contracts with a cash value at no additional charge. This is a special type of loan that prevents the unintentional lapse of a policy due to nonpayment of the premium.

Question Type- General Insurance In insurance, an offer is usually made when A. An applicant submits an application to the insurer. B. The insurer approves the application and receives the initial premium. C. The agent hands the policy to the policyholder. D. An agent explains a policy to a potential applicant.

A. An applicant submits an application to the insurer. In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy.

Question Type- Life Insurance Basics When the partners of a business develop an arrangement whereby should one of them die or become permanently disabled, the other partners would purchase the interest of the deceased or disabled partner at a predetermined price, this is called a/an A. Business continuation plan. B. Key person plan. C. Business overhead expense plan. D. Executive bonus plan.

A. Business continuation plan. Correct! A business continuation plan is an agreement between business owners whereby they agree, should one of them die or become disabled, the surviving owners will purchase the interest of the deceased or disabled owner at a predetermined price. Such a plan is usually funded by each owner purchasing insurance on each of the other owners.

Question Type- Life Insurance Policy Provisions, Options and Riders What limits the amount that a policyowner may borrow from a whole life insurance policy? A. Cash value B. Premiums paid C. Amount stated in the policy D. Face amount

A. Cash value correct! The amount available to the policyowner for a loan is the policy's cash value. If there are any outstanding loans, that amount will be reduced by the amount of the unpaid loans and interest.

Question Type- General Insurance When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following? A. Consideration B. Legal purpose C. Contract of adhesion D. Acceptance

A. Consideration Correct! Consideration is something of value that each party gives to the other. The consideration on the part of the insured is the payment of premium and the representations made in the application.

Question Type- Health Insurance Basics What phase begins after a new policy is delivered? A. Free-look period B. Insurability period C. Elimination period D. Grace period

A. Free-look period correct! The Free-Look Period occurs after a policy is delivered. This period allows the insured to review the policy and return it for a refund of the premium within a certain time interval.

Question Type- Life Insurance Policy Provisions, Options and Riders 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 primary beneficiary predeceases the insured B. The primary and contingent beneficiaries share death benefits equally C. With the primary beneficiary's written consent D. If the insured died from accidental means

A. If the primary beneficiary predeceases the insured correct! The daughter, as contingent beneficiary, would need to outlive the insured and primary beneficiary.

Question Type- General Insurance Which authority is NOT stated in an agent's contract but is required for the agent to conduct business? A. Implied B. Apparent C. Assumed D. Express .

A. Implied Correct! Implied authority is not written in the agent's contract but is required in order for the agent to conduct business. Implied authority exists because not every single detail of an agent's authority can be written in a contract

Question Type- Life Insurance Policy Provisions, Options and Riders The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called A. Joint and survivor. B. Fixed period. C. Fixed amount. D. Joint life.

A. Joint and survivor. correct! A joint and survivor option pays while either beneficiary is still living.

Question Type- Life Insurance Policies The premium of a survivorship life policy compared with that of a joint life policy would be A. Lower. B. Higher. C. As high. D. Half the amount.

A. Lower. correct! Survivorship Life is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age. The major difference is that survivorship life pays on the last death rather than upon the first death. Since the death benefit is not paid until the last death, the joint life expectancy in a sense is extended, resulting in a lower premium than that which is typically charged for joint life.

Question Type- Life Insurance Basics 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. correct! 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.

Question Type- Life Insurance Basics Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance? A. Replacement rule B. Reinstatement rule C. Conversion rule D. Disclosure rule

A. Replacement rule Correct! Anytime a new policy is issued that replaces or modifies existing insurance, a replacement form must be submitted to the ceding company.

Question Type- Life Insurance Policy Provisions, Options and Riders Which settlement option provides a single beneficiary with income for the rest of his/her life? A. Single Life B. Fixed Amount C. Lump Sum D. Retained Assets

A. Single Life Correct! The Single Life Option provides a single beneficiary with income for the rest of his/her life.

Question Type- Life Insurance Policy Provisions, Options and Riders The clause that protects the proceeds of a life insurance policy from creditors after the death of the insured is known as the A. Spendthrift clause. B. Benefit protection clause. C. Incontestability clause. D. Beneficiary protection clause.

A. Spendthrift clause. correct! The spendthrift clause protects the policy proceeds from creditors of the policyowner or beneficiary.

Question Type- Life Insurance Policy Provisions, Options and Riders When a life insurance policy stipulates that the beneficiary will receive payments in specified installments or for a specified number of years, what provision prevents the beneficiary from changing or borrowing from the planned installments? A. Spendthrift provision B. Settlement option C. Accelerated benefit provision D. Loan provision

A. Spendthrift provision Correct! When a life insurance policy contains a spendthrift provision, all rights of the beneficiary to change time of payment or amount of installments, surrender for cash, borrow against, or assign for any purpose, are withdrawn and those parts of the policy that may give the beneficiary such rights are declared inoperative and void.

Question Type- Annuities 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? A. The cash value will be paid to the annuitant's estate. B. The premium value will be paid to the annuitant's estate. C. All benefits will be forfeited. D. The cash value will be paid to the state government.

A. The cash value will be paid to the annuitant's estate. correct! If an annuitant dies during the accumulation period, the beneficiary is paid either the cash value of the policy or the amount of premiums paid, whichever is the larger amount. In this case, a beneficiary is not named, so the cash value will be paid to the annuitant's estate.

Question Type- Health Insurance Basics At what age does an individual qualify for Medicare? A. 60 B. 65 C. 70 D. 72

B. 65 correct! The federal government established Medicare as a means of providing health coverage for individuals over the age of 65.

Question Type- Insurance Regulation Which of the following is NOT a justifiable reason for the Superintendent to revoke, suspend, or refuse to renew a license? A. A licensee demonstrated incompetence or untrustworthiness to act in such capacity. B. A licensee does not sell enough policies to reach his financial goals. C. A licensee violated a provision of the New York Insurance Code. D. A licensee made a material misstatement in the application for the license.

B. A licensee does not sell enough policies to reach his financial goals. This may cause the insurer to not reappoint the agent, but it is not a concern of the Department.

Question Type- Life Insurance Policies 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. Correct! 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.

Question Type- Insurance Regulation Which of the following is true regarding licensing in the state of New York? A. Applicants do not have to take a prelicensing education course. B. Applicants must be at least 18 years old. C. Applicants must submit fingerprints. D. Applicants must have a bachelor's or associate's degree.

B. Applicants must be at least 18 years old. To qualify for an insurance license in this state, an individual must be at least 18 years old, be a New York resident, must meet prelicensing education requirements, and be found competent and trustworthy.

Question Type- Life Insurance Basics All of the following information about a customer must be used in determining annuity suitability EXCEPT A. Annual income. B. Beneficiary's age. C. Tax status. D. Financial experience.

B. Beneficiary's age. Correct! To ensure suitability of annuity products, producers must obtain relevant information about the consumer's age, income, financial status, tax status, financial experience and objectives. Beneficiary's age is not a suitability factor.

Question Type- Life Insurance Basics In terms of Social Security, what is the name for the time period after the youngest child of a family turns 16 and before the surviving spouse may start receiving retirement benefits? A. Accumulation period B. Blackout period C. Nonpayment interval D. Benefit reduction

B. Blackout period correct! Blackout period begins when the youngest child reaches the age of 16, and ends when the surviving spouse qualifies for retirement benefits, as early as age 60. No benefits are paid during this time.

Question Type- Life Insurance Basics 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. correct! Personal uses of life insurance include survivor protection, estate creation and conservation, cash accumulation, and liquidity. A buy-sell agreement is for business uses of life insurance.

Question Type- Health Insurance Basics A health insurance plan that covers all accidents and sicknesses that are not specifically excluded from the policy is referred to as a A. Broad plan. B. Comprehensive plan. C. General plan. D. Service plan.

B. Comprehensive plan. correct! Comprehensive health plans cover all accidents and sicknesses, with the exception of those conditions specifically stated in policy exclusions. Limited health insurance covers only those conditions that are stated in the policy.

Question Type- Insurance Regulation How often must an insurance agent licensed in the state of New York renew the license? A. Every birthday B. Every 2 years C. Every even-numbered year D. Every odd-numbered year

B. Every 2 years Insurance agent's license expires every 2 years. The licenses of all insurance agents born in odd numbered years will expire on their birthdays in odd numbered years. The licenses of all insurance agents born in even numbered years will expire on their birthdays in even numbered years.

Question Type- Health Insurance Basics Under a typical health insurance policy, claims that result from injuries while the insured was intoxicated or under the influence of drugs are generally A. Covered with a 90 days' waiting period. B. Excluded. C. Covered. D. Covered, but an extra premium is charged when a claim is filed.

B. Excluded. correct! In individual or group medical expense policies any claims that result while the insured is intoxicated or under the influence of drugs (unless administered by a physician) are typically not covered.

Question Type- General Insurance The authority granted to an agent through the agent's contract is referred to as A. Absolute authority. B. Express authority. C. Apparent authority. D. Implied authority.

B. Express authority. Express powers are written into the contract between the insurer and the agent.

Question Type- Life Insurance Policy Provisions, Options and Riders Which of the following statements is TRUE about a policy assignment? A. It authorizes an agent to modify the policy. B. It transfers rights of ownership from the owner to another person. C. It is the same as a beneficiary designation. D. It permits the beneficiary to designate the person to receive the benefits.

B. It transfers rights of ownership from the owner to another person. correct! The policyowner may assign a part of the policy (collateral assignment) or the entire policy (absolute assignment).

Question Type- Health Insurance Basics Which document helps ensure that full and fair disclosure is provided to the recipient of a policy? A. Statute of Limitations B. Outline of Coverage C. Benefit Limitations D. Policy Summary

B. Outline of Coverage correct! The Outline of Coverage is created to ensure full and fair disclosure to the recipient of a new policy. This document can be released at the time of application or upon delivery of the policy.

Question Type- General Insurance What is the major difference between a stock company and a mutual company? A. Types of whole life policies B. Ownership C. Amount of death benefit D. Number of producers

B. Ownership Mutual companies are owned by policyholders, while stock companies are owned by stockholders.

Question Type- Life Insurance Basics Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value? A. Effect of inflation on income over time. B. Predicted needs of the family after the insured's death. C. Insured's current and future income. D. Insured's annual expenses.

B. Predicted needs of the family after the insured's death. correct! The Human Life Value Approach to determining the value of an individual's life requires the calculation of probable future earnings of the insured, which involves wages, expenses, inflation, amount of time until retirement, and the time value of money. Predicted needs of the family after the insured's death are used in the needs approach.

Question Type- General Insurance Which of the following statements is an accurate comparison between private and government insurers? A. Private insurers provide insurance in areas where the government will not. B. Private insurers may be authorized to transact insurance by state insurance departments. C. Insurance provided by the government is called federal insurance. D. Private insurers offer fewer lines of insurance than government insurers.

B. Private insurers may be authorized to transact insurance by state insurance departments. Private insurers offer many lines of insurance. Government insurance programs, also known as social insurance, cover areas that private companies cannot or will not, providing programs like Medicare, Social Security, and National Flood Insurance. Government programs are funded with tax dollars and serve national causes, in contrast with private insurers.

Question Type- Life Insurance Policies To sell variable life insurance policies, an agent must receive all of the following EXCEPT A. A life insurance license. B. SEC registration. C. FINRA registration. D. A securities license. correct! Agents selling variable life products must be registered with FINRA, have a securities license, and must be licensed within the state to sell life insurance. SEC registration is for securities, not agents.

B. SEC registration. correct! Agents selling variable life products must be registered with FINRA, have a securities license, and must be licensed within the state to sell life insurance. SEC registration is for securities, not agents.

Question Type- Health Insurance Basics What is the best way to change an application? A. Draw a line through the incorrect answer and insert the correct one. B. Start over with a fresh application C. Erase the previous answer and replace it with the new answer D. White-out the previous answer

B. Start over with a fresh application Correct! Most companies require that the app be filled out in ink. The agent might make a mistake when filling out the app or the applicant might answer a question incorrectly and want to change it. There are two ways to correct an application. The first and best is to simply start over with a fresh application. If that is not practical, draw a line through the incorrect answer and insert the correct one. The applicant must initial the correct answer.

Question Type- Life Insurance Basics A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as A. Juvenile protection provision B. Survivor protection C. Life planning D. Survivorship insurance

B. Survivor protection correct! Life insurance can provide the funds necessary for the survivors of the insured to be able to maintain their lifestyle in the event of the insured's death. This is known as survivor protection.

Question Type- General Insurance Peril is most easily defined as A. Something that increases the chance of loss. B. The cause of loss insured against. C. An unhealthy attitude about safety. D. The chance of a loss occurring. .

B. The cause of loss insured against. Perils are the causes of loss insured against in an insurance policy.

Question Type- Life Insurance Policies Which of the following is TRUE regarding the insurance amount in a credit life policy? A. The amount of coverage can be greater than the amount owed. B. The creditor can only insure the debtor for the amount owed. C. The creditor may insure the debtor for an unlimited amount of coverage. D. Allowable amount of coverage is determined by the State Insurance Commissioner.

B. The creditor can only insure the debtor for the amount owed. Correct! Credit life insurance cannot pay out more than the balance of the debt, so that there is no financial incentive for the death of the insured.

Question Type- General Insurance Not all losses are insurable, and there are certain requirements that must be met before a risk is a proper subject for insurance. These requirements include all of the following EXCEPT A. The loss produced by the risk must be definite. B. The loss may be intentional. C. The loss must not be catastrophic. D. There must be a sufficient number of homogeneous exposure units to make losses reasonably predictable. .

B. The loss may be intentional. To insure intentional losses would be against public policy

Question Type- Life Insurance Policy Provisions, Options and Riders The owner of a life insurance policy wishes to name two beneficiaries for the policy proceeds. What will the soliciting insurance producer say? A. The proceeds will be split evenly between the two beneficiaries. B. The policyowner can specify the way proceeds are split in the policy. C. The way proceeds are split between beneficiaries is decided by which type of policy is chosen. D. Life insurance policies may have only one beneficiary.

B. The policyowner can specify the way proceeds are split in the policy. correct! The owner of a life insurance policy may name any individual as a beneficiary for the policy proceeds. The owner may name more than one individual, in which case the individual beneficiaries will split the benefit by the percentage specified in the policy.

Question Type- General Insurance For the purpose of insurance, risk is defined as A. An event that increases the amount of loss. B. The uncertainty or chance of loss. C. The certainty of loss. D. The cause of loss.

B. The uncertainty or chance of loss. Correct! Risk, or the chance of loss occurring, is the basic reason for buying insurance.

Question Type- Life Insurance Basics Are insurance company underwriters allowed to discriminate? A. Yes, but only for gender B. Yes, but not unfairly C. No, higher risks pay higher premium D. No, discrimination is an unfair practice

B. Yes, but not unfairly correct! The company will discriminate in favor of good risks and not of poor risks; however, it cannot discriminate unfairly by using factors such as race or national origin in their underwriting.

Question Type- Life Insurance Policy Provisions, Options and Riders The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive? A. $0 B. $50,000 (50% of the policy value) C. $100,000 D. $300,000 (triple the amount of policy value)

C. $100,000 correct! The triple indemnity accidental death rider obligates the company to pay three times the face amount of the policy if the insured dies as a result of an accident. The death must be accidental and not contributed to by any other factors and must occur within 90 days of the accident. In this case, since the insured contributed to his own death, the triple indemnity rider is void, but the beneficiary will still receive the policy's death benefit.

Question Type- Insurance Regulation Which of the following would be required to be licensed as an insurance producer? A. A salaried full-time employee who furnishes information for group insurance B. An insurance company director who performs executive, administrative and managerial duties C. A salaried employee who advertises and solicits insurance D. A person whose activities are limited to producing insurance advertisements.

C. A salaried employee who advertises and solicits insurance A person does not require an insurance producer license if he or she only advertises without intent to solicit insurance. However, once there is solicitation, a license is required.

Question Type- Health Insurance Basics What is the term used for an applicant's written request to an insurer for the company to issue a contract, based on the information provided? A. Insurance Request Form B. Request for Insurance C. Application D. Policy Request

C. Application correct! An individual can submit an application to an insurer, which requests that the insurer review the information and issue an insurance contract.

Question Type- Health Insurance Basics Medicaid is sponsored by what kind of sources? A. Federal only B. State only C. Both state and federal D. Private companies

C. Both state and federal Correct! Medicaid is sponsored at both the state and federal levels. Most other standard health insurance programs are provided by private insurance companies.

Question Type- Life Insurance Basics Which of the following would describe a legal document which would dictate who can buy a deceased partner's share of a business and for what amount? A. Key person agreement B. Split dollar agreement C. Buy-sell agreement D. Profit and loss agreement

C. Buy-sell agreement correct! A Buy-Sell agreement (also referred to as a business continuation agreement) is a legal contract that determines what will be done with a business in the event that an owner dies or becomes disabled.

Question Type- Health Insurance Basics A policy which covers medical costs related to a specific condition is called a A. Specific Condition Policy. B. Limited Coverage Policy. C. Dread Disease Policy. D. Condition-Specific Policy.

C. Dread Disease Policy. correct! Dread Disease policies cover medical expenses for a particular medical condition, such as cancer or heart disease.

Question Type- Life Insurance Basics Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation? A. Blackout approach B. Lump-sum approach C. Human life value approach D. Needs approach

C. Human life value approach Correct! Human life value approach is determined by the loss of income that would result with the death of the insured, after making adjustments for expenses, inflation, etc.

Question Type- Life Insurance Policy Provisions, Options and Riders What is the benefit of choosing extended term as a nonforfeiture option? A. It allows for coverage to continue beyond maturity date. B. It can be converted to a fixed annuity. C. It has the highest amount of insurance protection. D. It matures at age 100.

C. It has the highest amount of insurance protection. correct! 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. The duration of the new term coverage lasts for as long a period as the amount of cash value will purchase.

Question Type- Annuities Which of the following is TRUE regarding the accumulation period of an annuity? A. It is a period of time during which the beneficiary receives income B. It is limited to 10 years. C. It is a period during which the payments into the annuity grow tax deferred. D. It is also referred to as the annuity period.

C. It is a period during which the payments into the annuity grow tax deferred. Correct! The "accumulation period" is the period of time over which the annuitant makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred.

Question Type- Life Insurance Policy Provisions, Options and Riders A couple owns a life insurance policy with a Children's Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability? A. Her parents' federal income tax receipts B. Medical exam and parents' medical history C. Proof of insurability is not required. D. Medical exam

C. Proof of insurability is not required. Correct! If a Children's Term rider is attached to a life insurance policy, children can be covered under the policy until they reach the maximum age stated in the policy. At that point, they can convert their coverage to a new policy without having to issue proof of insurability.

Question Type- General Insurance The risk of loss may be classified as A. Named risk and un-named risk. B. High risk and low risk. C. Pure risk and speculative risk. D. Certain risk and uncertain risk.

C. Pure risk and speculative risk. Correct! Pure risks involve the probability or possibility of loss with no chance for gain. Pure risks are generally insurable. Speculative risks involve uncertainty as to whether the final outcome will be gain or loss. Speculative risks are generally uninsurable.

Question Type- Life Insurance Policies 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. Correct! 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.

Question Type- Insurance Regulation Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information? A. The Guaranty Association B. Consumer Privacy Act C. The Fair Credit Reporting Act D. Unfair Trade Practices Law

C. The Fair Credit Reporting Act The purpose of the Fair Credit Reporting Act is to protect consumers against the circulation of inaccurate or obsolete information and to ensure that consumer reporting agencies are fair and equitable in their treatment of consumers.

Question Type- General Insurance Which of the following is NOT the consideration in a policy? A. The premium amount paid at the time of application B. The promise to pay covered losses C. The application given to a prospective insured D. Something of value exchanged between parties

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

Question Type- Life Insurance Basics Who is the owner and who is the beneficiary on a Key Person Life Insurance policy? A. The key employee is the owner and beneficiary. B. The key employee is the owner and the employer is the beneficiary. C. The employer is the owner and beneficiary. D. The employer is the owner and the key employee is the beneficiary.

C. The employer is the owner and beneficiary. With the key-person coverage, the business (the employer) is the applicant, owner, premium payer, and beneficiary.

Question Type- Annuities Who bears all of the investment risk in a fixed annuity? A. The beneficiary B. The annuitant C. The insurance company D. The owner

C. The insurance company correct! Fixed annuities guarantee a minimum amount of interest to be credited to the purchase payment. Income payments do not vary from one payment to the next. The insurance company can afford to make guarantees because the money of a fixed annuity is placed in the general account of the insurance company, which is part of its investment portfolio. The company makes conservative enough investments to insure a guaranteed rate to the annuity owners.

Question Type- Life Insurance Policies All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT A. Most term policies contain a convertibility option. B. Upon conversion, the premium for the permanent policy will be based upon attained age. C. Upon conversion, the death benefit of the permanent policy will be reduced by 50%. D. Evidence of insurability is not required.

C. Upon conversion, the death benefit of the permanent policy will be reduced by 50%. correct! Convertible term insurance is convertible without proof of insurability up to the full term death benefit. However, upon conversion, the premium for the permanent policy will be based on the insured's attained age.

Question Type- Life Insurance Policies In a survivorship life policy, when does the insurer pay the death benefit? A. Half at the first death, and half at the second death B. If the insured survives to age 100 C. Upon the last death D. Upon the first death correct! Survivorship life pays on the last death rather than upon the first death.

C. Upon the last death correct! Survivorship life pays on the last death rather than upon the first death.

Question Type- Life Insurance Policy Provisions, Options and Riders According to the Entire Contract provision, a policy must contain A. A declarations page with a summary of insureds. B. Buyer's guide to life insurance. C. Listing of the insured's former insurer(s) for incontestability provisions. D. A copy of the original application for insurance. correct! An insurance contract must contain a copy of the original application.

D. A copy of the original application for insurance. correct! An insurance contract must contain a copy of the original application.

Question Type- Life Insurance Policies The death protection component of Universal Life Insurance is always A. Whole Life B. Adjustable Life C. Increasing Term D. Annually Renewable Term Correct! A universal policy has two components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.

D. Annually Renewable Term Correct! A universal policy has two components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.

Question Type- Life Insurance Basics 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 correct! Any form of Life insurance may be used to fund a buy-sell agreement.

Question Type- Insurance Regulation Which of the following would NOT be considered an improper claims practice? A. Failing to acknowledge and act promptly upon communications with respect to an insurance claim. B. Misrepresenting to insureds pertinent facts or policy provisions relating to coverages at issue. C. Failing to adopt and implement reasonable standards for prompt investigation and processing of insureds' claims. D. Denying a claim after proof of loss statements are completed and submitted by insureds.

D. Denying a claim after proof of loss statements are completed and submitted by insureds. An insurer must either affirm or deny a claim within a reasonable period of time after proof of loss has been submitted.

Question Type- Life Insurance Policy Provisions, Options and Riders Which of the following is true of a children's rider added to an insured's permanent life insurance policy? A. It is permanent insurance. B. The policy covers only the natural children of the insured. C. Each child covered must show evidence of insurability. D. It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age.

D. It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age. Correct! Children's rider is term insurance covering all of the children in the family, including newly born children, and is convertible to permanent insurance upon a child reaching the maximum age without evidence of insurability.

Question Type- Life Insurance Policies Which statement is NOT true regarding a Straight Life policy? A. The face value of the policy is paid to the insured at age 100. B. It usually develops cash value by the end of the third policy year. C. It has the lowest annual premium of the three types of Whole Life policies. D. Its premium steadily decreases over time, in response to its growing cash value.

D. Its premium steadily decreases over time, in response to its growing cash value. correct! Straight Life policies charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit.

Question Type- Life Insurance Basics When an applicant purchased a life insurance policy, the agent dated the application 4 months prior. When asked by the applicant, the agent said he was allowed to backdate policies up to 6 months if it would A. Shorten the contestability period. B. Eliminate pre-existing conditions. C. Help him meet a sales quota for that period. D. Lower the insured's premium.

D. Lower the insured's premium. Correct! An agent may backdate an application for up to 6 months to accomplish a lower premium rate for the insured.

Question Type- Life Insurance Policy Provisions, Options and Riders 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. Accumulation at Interest B. Paid-up additions C. Dividend Accumulation option D. Paid-up option

D. Paid-up option Correct! 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.

Question Type- Life Insurance Policies A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy A. Built cash values. B. Required proof of insurability every year. C. Decreased death benefit at each renewal. D. Required a premium increase each renewal.

D. Required a premium increase each renewal correct! Annually Renewable Term policies' premiums are adjusted each year to the insured's attained age; however, the policy may be guaranteed renewable. Death benefits remain level, and as with any term policy, there are no cash values.

Question Type- Life Insurance Policies An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called A. Modified Endowment Contract (MEC). B. Level term life. C. Graded premium whole life. D. Single premium whole life.

D. Single premium whole life. Correct! Single premium whole life requires the entire premium to be paid in one lump sum at the policy's inception.

Question Type- Health Insurance Basics A person steps off a street car and trips and breaks his ankle. This type of injury can be described as A. A recurrent injury. B. Intentional. C. Not covered. D. Sudden and unforeseen.

D. Sudden and unforeseen. Correct! Accidental bodily injury is an unforeseen and unintended injury that resulted from an accident rather than a sickness.

Question Type- Insurance Regulation Who does the agent represent? A. The public B. Managing general agents (MGAs) C. The insured D. The insurer

D. The insurer Correct! The agent represents the insurer not the insured.

Question Type- Life Insurance Policies An employee quits his job on May 15 and doesn't convert his Group Life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. Which of the following statements best describes what will happen? A. The insurer will pay a reduced death benefit to the beneficiary. B. The insurer will pay the death benefit minus one month's premium. C. The insurer will pay nothing because the employee has terminated his group insurance and hasn't started the individual one. D. The insurer will pay the full death benefit from the group policy to the beneficiary.

D. The insurer will pay the full death benefit from the group policy to the beneficiary. correct! The employee usually has a period of 31 days after terminating from the group in order to exercise the conversion option. During this time, the employee is still covered under the original group policy.

Question Type- Health Insurance Basics An agent is in the process of replacing the insured's current health insurance policy with a new one. Which of the following would be a proper action? A. There should be at least a 10-day gap between the policies. B. Policies must overlap to cover pre-existing conditions. C. The old policy must be cancelled before the new one can be issued. D. The old policy should stay in force until the new policy is issued.

D. The old policy should stay in force until the new policy is issued. correct! The agent must make sure that the current policy is not cancelled before the new policy is issued.

Question Type- Insurance Regulation Which of the following individuals must pass the written examination to be licensed as an insurance agent? A. A producer previously licensed in New Jersey who is applying for a New York license 120 days after becoming a resident of this state B. A nonresident licensee currently licensed in another state C. A ticket-selling airline representative for one-time issuance of baggage or accident insurance D. An applicant who has passed the written examination for an insurance agent's license in the past if he applies within 2 years following the date of license termination

A. A producer previously licensed in New Jersey who is applying for a New York license 120 days after becoming a resident of this state Each of the above do not need to take the written examination, except for a previously licensed agent in New Jersey who has allowed more than 90 days to lapse since becoming a resident of New York.

Question Type- Health Insurance Basics In a replacement situation, all of the following must be considered EXCEPT A. Assets. B. Benefits. C. Limitations. D. Exclusions.

A. Assets. Correct! In a replacement situation the agent must be careful to compare the benefits, limitations and exclusions found in the current and the proposed replacement policy.

Question Type- General Insurance Who might receive dividends from a mutual insurer? A. Subscribers B. Stockholders C. Agents D. Policyholders

D. Policyholders A mutual insurer has no stock, and is owned by the policyholders. Since they may receive a dividend (not guaranteed), such policies are known as participating policies. Dividends received by policyholders of a mutual insurer are not taxable.