Learn As you Go Exam

An IRA purchased by a small employer to cover employees is known as a ?

A. 403(b) plan. B. Simplified Employee Pension plan. c. 401(k) plan. D. Defined contribution plan. *B. A Simplified Employee Pension (SEP) is an employer sponsored IRA. Contributions to the plan are not included in the employee's taxable income for the year, to the extent that they do not exceed the maximums allowed. Distributions from a SEP are taxable as ordinary income when received at retirement.

How long does the Commissioner serve in office?

A. No longer than 5 years. B. There is no specified length of term; the Commissioner serves at the pleasure of the Governor. C. The Commissioner is selected for a life term. D. 2 years. *B. The Commissioner is appointed by and serves at the pleasure of the Governor. He or she may be removed from office by the Governor at any time.

Which of the following is NOT the consideration in a policy?

A. The applicant 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. Consideration is something of value that is transferred between the two parties to form a legal contract.

What is the purpose of the Insurance Guaranty Association?

A. To provide double indemnity for the insured's loss. B. To prevent unfair trade practices. C. To protect policyowners against insurer insolvency. D. To protect insurance companies against insurance fraud. *C. The Insurance Guaranty Association was created to protect policyowners and beneficiaries against losses caused by the insolvency of an insurance company.

Which of the following can remove the Insurance Commissioner from office?

A. Governor. B. Voters. C. NAIC President. D. Insurance Guaranty Association. *A. The Commissioner is appointed by the Governor and may also be removed from office by the Governor, if such action is required.

The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the?

A. Paid-up additions. B. One-year term option. C. Paid-up option. D. Accerlerated endowment. *B. The dividend is utilized to purchase one-year term insurance.

An insured receives an annual life insurance dividend check. What term best describes this arrangement?

A. Cash option. B. Reduction of Premium. C. Annual Dividend Provision. D. Accumulation at Interest. *A. The cash option allows an insurer to send the policy holder an annual, nontaxable dividend check.

Which of the following must an insurer obtain in order to transact insurance within a given state?

A. Certificate of authority. B. Producer's certificate. C. Business entity license. D. Insurer's license. *A. All insurers (Domestic, foreign, or alien) must obtain a certificate of authority before transacting insurance within a given state.

What is the maximum period for a temporary license in this state?

A. 180 days. B. One year. C. 90 days. D. 30 days. *A. A temporary license is good for 180 days.

If $100,000 of life insurance proceeds were used in a settlement option, which paid $13,000 per year for ten years, which of the following would be taxable annually?

A. $3,000. B. $13,000. C. $10,000. D. $7,000. *A. If $100,000 of life insurance proceeds were used in a settlement option paying $13,000 per year for 10 years, $10,000 per year would be income tax free (as principal) and $3,000 per year would be income taxable (as interest).

In the event an employer wishes to purchase life insurance on an employee, within how many days receiving a written notice must the employee consent to be insured?

A. 7 days. B. 10 days. C. 30 days. D. 60 days. *C. In order for an employer to purchase life insurance on an employee, the employee must provide consent. Consent is assumed if the employee is delivered a notice of coverage and does not object to the coverage within 30 days.

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

A. Paid-up option. B. Accumulated at interest. C. Reduced paid-up. D. Extended term. *C. 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.

Within what timeframe should an applicant or a producer request a hearing before the Commissioner regarding the notice of denial or nonrenewal of a license?

A. Within 30 days after the license is denied. B. Within 30 days after the application for renewal is received by the Commissioner. C. Within 63 days after the notice of denial is mailed. D. Within 63 days after the application for license is mailed. *C. Once the Commissioner notifies an applicant or a producer of a license denial or nonrenewal, the applicant or producer has the right to make a written demand for a hearing (within 63 days after the denial/nonrenewal notice is mailed). The hearing must be held within 30 days of the written demand.

All of the following statements are true regarding tax-qualified annuities Except?

A. Withdrawals are taxed. B. Employer contributions are not tax deductible. C. Annuity earnings are tax deferred. D. They must be approved b y the IRS. *B. Tax-qualified annuities must be approved by the IRS and allow for tax deductible employer contributions. All withdrawals are taxed and earnings grow tax deferred.

Which of the following would be considered a Class A misdemeanor?

A. committing insurance fraud. B. Failing to provide the insured with the policy summary. C. Willfully violating the Indiana Insurance Code. D. Being involved in an unfair competition practice. *C. Any person who willfully and recklessly violates the Indiana Insurance Code will be charged with Class A misdemeanor, which is punishable by up to one year in jail or a fine not to exceed $5,000.

How long is a free-look period for replacement of policies?

A. 3 working days. B. 20 day. C. 10 day. D. 30 day. *B. Replacement policies require a 20-day free-look period.

An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision?

A. Common Disaster. B. Accidental Death. C. Survivor Life. D. Second-to-Die. *A. Under the Uniform Simultaneous Death Law, Common Disaster provision, the law will assume that the primary beneficiary dies first in a common disaster as long as the beneficiary dies within this specified period of time following the death of the insured (usually 30 days). This provides that the proceeds will be paid to either the contingent beneficiary or the insured's estate, if no contingent beneficiary is designated.

Any inducement offered to the insured in the sale of an insurance policy that is not specified in the policy is an unlawful practice known as?

A. Controlled business. B. Coercion. C. Rebating. D. Twisting. *C. Rebating is defined as any inducement offered to the insured in the sale of insurance products that is not specified in the policy. Both the offer and acceptance of a rebate are illegal.

Which of the following will be included in a policy summary?

A. Copies of illustrations and application. B. Comparisons with similar policies. C. Primary and secondary beneficiary designations. D. Premium amounts and surrender values. *D. A policy summary must be delivered along with the policy and will provide the producer's name and address, the insurance company;s home office address, the generic name of the policy issued, and premium, cash value, surrender value and death benefit figures for specific policy years.

Which of the following is True regarding the premium in term policies?

A. Decreasing term policy will have a decreasing premium. B. The premium is level. C. Only level term policy has a level premium. D. The premium in term policies is not based on the insured's age. *B. Regardless of the type of term insurance purchased, the premium is level throughout the term of the policy. Only the amount of the death benefit may change.

An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of a report is that?

A. Inspection Report. B. Medical Information Bureau's report. C. Agent's Report. D. Underwriter's Report. *A. Inspection reports cover moral and financial information regarding a potential insured, usually supplied by private investigators and credit agencies. Companies that use inspections reports are subject to the rules outlined in the Fair Credit Reporting Act.

What is the purpose of a conditional reciept?

A. It is intended to provide coverage on a date prior to the policy issue. B. It guarantees that a policy will be issued in the amount applied for. C. It serves as proof that the applicant has been determined insurable. D. It is given only to applicants who fully prepay the premium. *A. Coverage commences on the date of the application or the date of a medical examination, whichever is later, on the condition that the applicant is determined to be insurable at the rate applied for.

What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military?

A. Limited. B. Aviation. C. Hazardous occupation. D. Military service or war. *D. There are two different types of exclusions that may be used by life insurers that limit the death benefit if the insured dies as a result of war or while serving in the military. The status clause excludes all causes of death while the insured is on active duty in the military. The results clause only excludes the death benefit if the insured is killed as a result of an act of war.

In order to get a non-resident license in this state, producers must?

A. Apply and pay a fee to a non-resident state that reciprocates. B. Pass the non-resident state exam and satisfy their continuing education. C. Represent an agency located in this state. D. Surrender their licenses in their state of residence. *A. Producers may apply for a non-residential license by showing that they are in good standing as producers in their home states and by paying a fee, if the two states reciprocate.

Which of the following is NOT typically excluded from life policies?

A. Death that occurs while a person is committing a felony. B. Death due to war or military service. C. Death due to plan crash for a fare-paying passenger. D. Self-inflicted death. *C. Generally, policies do not exclude conditions in which an insured is a fare-paying passenger on a commercial airline.

Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?

A. Reduced paid-up. B. Paid-up options. C. Extended term. D. Cash surrender. *D. Once the cash surrender value is paid, the contract is over.

Traditional IRA contributions are?

A. Never tax deductible. B. Partially tax deductible depending on the income level. C. Tax deductible. D. Deducted based on the income level. *C. The following taxation rules apply to contributions made to traditional IRA plans: tax-deductible contributions for the year of the contribution (based on the person's income); contributions must be made in "cash" in order to be tax deductible; excess contributions are taxed at 6% per year as long as the excess amounts remain in the IRA; and tax-deferred earnings are not taxed until withdrawn.

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. An agent may backdate an application for up to 6 months to accomplish a lower premium rate for the insured.

Which of t\he following would qualify as a competent party in an insurance contract?

A. The applicant is under the influence of a mind-impairing medication at the time of application. B. The applicant has a prior felony conviction. C. The applicant is intoxicated at the time of application. D. The applicant is a 12-year-old student. *B. When an insurer and insured enter into a contract, both parties must be of legal age and mentally competent. It is legal for a person convicted of a felony to buy an insurance contract. An intoxicated person, however, may not be mentally competent, a 12-year-old student is considered to be underage in most states and a person under mind-impairing medication most likely would not be mentally competent.

An insurer may disclose an applicant's AID/HIV test results to all of the following Except?

A. The applicant. B. The applicant's previous insurer. C. The applicant's physician. D. The insurer's underwriting department. *B. AIDS/HIV test results may only be disclosed to the applicant, applicant's physician, the insurer's underwriting department, and reinsurers, An insurer may share test results with the MIB, under the condition the report includes non-HIV diseases and does not explicitly report the presence of HIV.

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

A. Assignment Rights. B. Owner's Rights. C. The Entire Contract Provision. D. The Consideration Clause. *B. Policyowners can learn about their ownership rights by referring to the policy.

In an annuity, the accumulated money is converted into a stream of income during which time period?

A. Conversion period. B. Annuitization period. C. Payment period. D. Amortization period. *B. The " annuitization period" (annuity period) is the time during which accumulated money is converted into an income stream.

The paid-up addition option uses the dividend?

A. To purchase a one-year term insurance in the amount of the cash value. B. To reduce the next year's premium. C. To accumulate additional savings for retirement. D. To purchase a smaller amount of the same type of insurance as the original policy. *D. The dividends are used to purchase a single premium policy in addition to the face amount of the permanent policy.

Forcing a client to buy insurance from a particular lender as a condition of granting a loan is defined as?

A. Rebating. B. Misleading advertising. C. Defamation. D. Coercion. *C. 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 terms means a result of calculation based on the average number of months the insured is projected to live due to medical history and mortality factors?

A. Risk Exposure. B. Morbidity. C. Life expectancy. D. Morality rate. *C. Life Expectancy is an important concept in life settlement contracts. It refers to a calculation based on the average number of months the insured is projected to live due to medical history and mortality factors (an arithmetic mean).

Which of the following is a feature of a variable annuity?

A. Securities license is not required. B. Benefit payment amounts are not guaranteed. C. Payments into the annuity are kept in the company's general account. D. Interest rate is guaranteed. *B. Under a variable annuity, the issuing insurance company does not guarantee a minimum interest rate or the benefit payment amounts. The annuitant's payments into the annuity are invested in the insurer's separate account. Agents selling variable annuities are required to have a securities license in addition to their life agent's license.

Once a complaint has been filled with the Commissioner regarding an unfair claims practice, the Commssioner?

A. Within 20 days will suspend the company's certificate of authority. B. Within 10 days request a report from the company in violation. C. Within 10 business days will send a copy of the complaint to the company involved. D. Within 20 business days will inform the complaining party of the action taken.

According to underwriting rules pertaining to AIDS and HIV, all of the following questions will be allowed on an application for life or health insurance Except?

A. Factual questions regarding the applicant having HIV. B. Questions about the applicant's history of sexually transmitted disease. C. Medically specific questions. D. Questions directed to determine the applicant's sexual orientation. *D. Questions directed towards determining the applicant's sexual orientation are prohibited.

Which of the following is Not an example of controlled business?

A. A licensee writes policies solely for his immediate family. B. A licensee writes policies solely for his employer. C. A licensee writes policies solely for friends and their families. D. A licensee writes policies solely for himself. *C. Controlled business is defined as insurance written on the interests of the licensee him or himself, the licensee's immediate family or the licensee's employer.

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

A. A medical examination. B. The agent's report. C. The inspection report. D. The Medical Information Bureau. *D. An agent's report and inspection report provide personal information. Medical exams provide information on current health. Only the MIB will provide information about an applicant's medical history.

A candidate applying for which of the following licenses will NOT be required to pass a written examination?

A. A nonresident producer. B. A surplus lines producer. C. An insurance producer. D. An insurance consultant. *A. Unless they are exempt under Indiana regulations, residents must pass a written examination when applying for an insurance producer, consultant or surplus line producer license. Nonresident producers do not need to fulfill prelicensing and examination requirements.

Which of the following is true regarding a hearing upon the nonrenewable of a producer's license?

A. After the hearing, the Commissioner may impose a criminal penalty on the applicant. B. A hearing guarantees renewal of the license. C. The Commissioner may request a hearing within 63 days of the nonrenewal date. D. The hearing must be held within 30 days of the written demand. *D. Once the Commissioner notifies an applicant or a producer of a license denial or nonrenewable, the applicant or producer has the right to make a written demand for a hearing (within 63 days after the denial/nonrenewal notice is mailed). The hearing must be held within 30 days of the written demand.

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. Aleatory. B. Good health. C. Adhesion. D. Conditional. *A. In an aleatory contract, unequal amounts are exchanged between payments and benefits. In this instance, the insured receives a large benefit for a small price.

If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply?

A. 7 days. B. 10 days. C. 3 days. D. 5 days. *D. 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.

Jeff is 45 years old and currently owns life insurance, but is considering purchasing a new Universal Life policy. Which of the following scenarios would NOT involve replacement?

A. Allowing his one-year Term policy to expire. B. Borrowing 25% of the cash value of his existing Whole Life policy to purchase the new Universal Life. C. Terminating the existing Term to Age 65 policy. D. Placing his existing Whole Life on Extended Term. *A. Allowing a term policy to expire at the end of its term would not be considered a replacement. All the other scenarios would result in diminishing the existing policy's value.

Which of the following determines the length of time that benefits will be received under the Fixed-Amount settlement option?

A. Amount of interest. B. Size of each installment. C. Predetermined length of time stated in the contract. D. Length of income period. *B. The size of each installment determines the length of time that benefits are received under the Fixed Amount settlement option. It logically follows that larger installments translate into shorter benefit periods.

Which of the following is Not an essential element of an insurance contract?

A. Legal purpose. B. Counteroffer. C. Consideration. D. Agreement. *B. In order for insurance contracts to be legally binding, they must have four essential elements. (1) Agreement (offer and acceptance), (2) Consideration, (3) Competent parties, and (4) legal purpose. Counteroffer is not required.

All of the following could be reasons for issuing a temporary producer's license Except?

A. Licensing of new insurance producers after the business has been transferred. B. Training a new personnel after the producer becomes disabled. C. Servicing the existing accounts until the producer returns from the Armed Forces. D. The sale of the insurance business due to the death of the producer. *A. A temporary insurance producer's license may be issued to allow for an orderly sale of the business, servicing of the existing accounts or training of new personnel to operate the business. The license, however, will expire when the business has been transferred.

Which of the following is true about the Commissioner of Insurance?

A. The Commissioner is authorized to participate in the NAIC. B. The Commissioner may be removed from office by popular vote. C. The Commissioner is appointed by the NAIC. D. The Commissioner must present a bond in the sum of $100,000. *A. The Commissioner is appointed by the Governor and may also be removed from office by the Governor, if such action is required. The Commissioner must present a bond in the sum of $50,000 with surety, and is authorized to participate in the National Association of Insurance Commissioners (NAIC).

A producer licensed in another state wants to become a non-resident producer in Indiana. The other state gives the same privileges to Indiana producers as it does to it own producers. Indiana, therefore, extends the licensing privileges to the prospective producer of the other state. What is this called?

A. Uniform application. B. Reciprocity. C. Fair exchange. D. Residency privilege. *B. "Reciprocity" occurs when the state in which the person resides accords the same privilege to residents of Indiana.

The sole beneficiary of a life insurance policy dies before the insured. If the policy owner fails to change the beneficiary before the insured's death, the proceeds of the policy will go to?

A. the insured's estate. B. Probate. C. The state. D. The beneficiary's estate. *A. In the absence of a viable beneficiary, proceeds will be paid to the estate of the insured.

When producers change the address of their residence or office, the Insurance Department must be notified within?

A. 10 days. B. 31 days. C. 30 days. D. 60 days. *C. Producers have 30 days to notify the Insurance Department when they have changed their residential or business address. legal name, or email address.

For how long is an insurance producer's license valid?

A. For as long as the producer is in good standing. B. For as long as the fees are paid and the education requirements are met by the due date. C. For 4 years. D. For 10 years. *B. An insurance producer's license remains in effect unless it is revoked or suspended, as long as the renewal fee is paid and the educational requirements are met by the due date.

Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured?

A. Option A. B. Option B. C. Corridor option. D. Variable option. *B. 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. At any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value.

A 40-year old man buys a whole life policy and names his wife as his only beneficiary. His wife dies 10 years later. He never remarries and dies at age 61, leaving 2 grown-up children. Assuming he never changed the beneficiary, the policy proceeds will go to?

A. The insured's estate. B. The insured's firstborn child. C. Both children who share equally on a per-capita basis. D. The insurance company. *A. Because there is no viable beneficiary at the time of death, proceeds are paid to the insured's estate.

If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to?

A. Charge a higher premium. B. Require a yearly medical examination. C. Lower its insurability standards. D. Refuse to issue the policy. *A. Charge a higher premium.

Which two terms are associated directly with the way an annuity is funded?

A. Immediate or deferred. B. Renewable or convertible. C. Single payment or periodic payments. D. Increasing or decreasing. *C. 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.

When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount?

A. In lesser amounts for the remaining policy term of age 100. B. Equal to the cash value surrendered from the policy. C. The same as the original policy minus the cash value. D. Equal to the original policy for as long as the cash values will purchase. *D. With this option, the cash value is used as a single premium to purchase the same face amount as the original policy for as long a period of time as the cash will buy at the insured's current age.

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 applicant process. What can they do?

A. Pay a decreased death benefit. B. Sue for the right to not pay the death benefit. C. Pay the death benefit. D. Refuse to pay the death benefit because of the fraud. *C. 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.

An insured committed suicide one year after his life insurance policy was issued. The insurer will?

A. Pay the policy's cash value. B. Pay the full death benefit to the beneficiary. C. Pay nothing. D. Refund the premiums paid. *D. If the insured commits suicide within 2 years following the policy effective date, the insured's liability is limited to a refund of premium.

All of the following are true about variable products Except?

A. The minimum death benefit is guaranteed. B. The cash value is not guaranteed. C. Policyowners bear the investment risk. D. The premiums are invested in the insurer's general account. *D. Insurers selling variable products invest their customer's monies in a separate account, which is very similar to a mutual fund. Since there is no guaranteed rate of return, customers must bear the investment risk.

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

A. General accounts. B. Separate accounts. C. Liability accounts. D. Annuity accounts. *B. Any domestic insurer issuing variable contracts must establish one or more separate accounts. The insurer must maintain in each separate account assets with a value at least equal to the reserves and other contract liabilities connected to the account.

The main difference between immediate and deferred annuities is?

A. The number of insureds. B. the amount of each payment. C. When the income payments begin. D. How the annuity is purchased. *C. the main difference between immediate and deferred annuities is when the income payments begin. Immediate annuities will begin payments within the first year, while deferred annuities will not gain payments until sometime after the first year.

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 the entire group.

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?

A. Experience Rating. B. Group rate. C. Insurer's scheduled rate. D. Attained age. *D. If an employee terminates membership in the insured group, the employee has the right to convert to an individual whole life policy without proving insurability. The insurer will determine what types(s) of policy an employee may convert to, but it must be issued at a standard rate, based on the individual's attained age.

If a company transacts any business of insurance without a certificate of authority, what is the maximum penalty that can be charged to the director of that company?

A. Civil penalty of $25,000. B. $30,000 fine and a jail sentence up to 1 year. C. $50,000 fine or the amount of commissions made, whichever is greater. D. Up to $100,000 in fines. *A. If a company transacts any business of insurance without a certificate, or if it transacts insurance business not specified in the company's certificate of authority, the Commissioner may impose a maximum civil penalty of $25,000 on the director or officer responsible.

Fixed annuities provide all of the following Except?

A. Future income payments. B. Hedge against inflation. C. Equal monthly payments for life. D. Minimum guaranteed rate of interest. *B. Fixed annuities invest premium payments into a general account- a safe and conservative investment portfolio. They also provide a specified dollar amount for each annuity payment regardless of the purchasing power of the money. Variable annuities premiums are invested in securities, hopefully maintaining a constant purchasing power, and therefore providing protection against inflation.

Representations are written or oral statements made by the applicant that are?

A. Immaterial to the actual acceptability of the insurance contract. B. Considered true to the best of the applicant's knowledge. C. Guaranteed to be true. D. Found to be false after further investigation. *B. Representations are statements made by an applicant that they believe to be true.

Which of the following is true regarding a temporary insurance producer's license?

A. It is available to individuals in the process of completing their prelicensing requirements. B. It allows a resident producer to do business temporarily in another state. C. It requires passing a limited examination. D. It may not exceed 180 days. *D. A temporary insurance producer's license is valid for 180 days, and it could only be issued in certain circumstances if the Commissioner determines that it's in the public interest.

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

A. Payor rider. B. Other-insured rider. C. Change of insured rider. D. Juvenile rider. *B. The other-insureds rider is useful in providing insurance for more than one family member. The type of insurance offered by this rider is usually term insurance, with the right to convert to permanent insurance.

Life Insurance Replacement Rule 16.1 is considered which of the following?

A. Privacy protection rule. B. Advertising rule. C. Solicitation rule. D. Disclosure rule. *D. Life Insurance Replacement is considered a disclosure rule (Rule 16.1): it requires for the insurance companies and their producers to provide adequate information to consumers to help them make educated decisions about replacement of policies.

Under the Fair Credit Reporting Act, if the consumer challenges the accuracy of the information contained in his or her report, the reporting agency must?

A. Send an actual certified copy of the entire report to the consumer. B. Respond to the consumer's complaint. C. Defend the report if the agency feels it is accurate. D. Change the report. *B. The consumer has the right to request the information on the report, the reasons for turn down and any adverse underwriting decisions. the reporting agency is required to respond to the consumer's complaint, and, if necessary, to reinvestigate the report.

Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?

A. Subrogation. B. Warranty. C. Aleatory. D. Adhesion. *C. An insurance contract is an aleatory contract in that it requires a relatively small amount of premium for a large risk.

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. In most states, if death results from suicide within a certain period, the insurer is not obligated to pay the death benefit.

Who bears all of the investment risk in a fixed annuity?

A. The annuitant. B. The insurance company. C. The owner. D. The beneficiary. *B. 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.

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?

A. $20,000. B. $25,000. C. $50,000. D. The face amount will be determined by the insurer. *C. The face of the term policy would be the same as the face amount provided under the whole life policy.

All of the following would be considered rebating Except?

A. An agents misrepresents policy benefits to convince a policyowner to replace policies. B. An agents offers the use of his lake house to a client as an inducement to buy an insurance policy from him. C. An agent offers to share his commission with a policyholder. D. An agent offers tickets to a baseball game as an inducement to buy insurance. *A. Rebating occurs when an insured is offered something of value in order to induce the sale of an insurance product. Both the offer and acceptance of a rebate are illegal.

The insurer discovered that one of the applicants is for life insurance missed a couple of questions on the application. What should the insurer do with the application?

A. Answer the missed questions for the applicant. B. Acknowledge the missed questions with a signature and continue the policy issue process. C. Proceed with issuing a policy. D. Return to the applicant for completion. *D. Any unanswered questions need to be answered before the policy is issued. If the insurer receives incomplete applications, they need to be returned to the applicants for completion.

What is a material misrepresentation?

A. Any misstatement made by an applicant for insurance. B. Any misstatement by the producer. C. Concealment. D. A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company. *D. A material misrepresentation is a statement that, if discovered, would alter the underwriting decision of the insurance company.

Jack is licensed as a life producer and Jill is licensed as a property and casualty producer. Jack sends one of his life insurance clients to Jill to buy automobile insurance. Jill makes the sale and sends a portion of her commission to Jack as a finder's fee. Which is true concerning these events?

A. Both Jack and Jill are guilty of rebating. B. Neither is guilty of rebating. C. Only Jill is guilty of rebating. D. Only Jack is guilty of rebating. *B. It is illegal for any insurer, producer or surplus lines producer to pay any commission to any person for services, unless at the time services were performed that person held a valid license or the recipient is not involved in the insurance sold. Since Jack was not directly involved in the sale of the property and casualty insurance, neither Jack nor Jill are guilty of rebating.

Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member?

A. Children's rider. B. Additional insured rider. C. Family term rider. D. Spouse rider. *C. A single rider that provides coverage on every family member is called a "family rider".

If a company transacts any business of insurance without a certificate of authority, what is the maximum penalty that can be charges to the director of that company?

A. Civil penalty of $25,000. B. $30,000 fine and a jail sentence up to 1 year. C. $50,000 fine or the amount of commissions made, whichever is greater. D. Up to $100,000 in fines. *A. If a company transacts any business of insurance without certificate, or if it transacts insurance business not specified in the company's certificate of authority, the Commissioner may impose a maximum civil penalty of $25,000 on the director or officer responsible.

Which of the following best describes the MIB?

A. It is a rating organization for health insurance. B. It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance. C. It is a government agency that collects medical information on the insured from the insurance companies. D. It is a member organization that protects insured against insolvent insurers. *B. The MIB is a nonprofit trade organization which receives adverse medical information from insurance companies and maintains confidential medical impairment information on individuals.

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. 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.

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. No taxes are due sine the plan participant is over the age 59 1/2. B. There is a 10% early withdrawal penalty. C. The amount distributed is subject to ordinary income tax. D. The amount of the distribution is reduced by the amount of a 20% withholding tax. *D. 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.

If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a?

A. Rollover. B. Settlement option. C. Nontaxable exchange. D. Nonforfeiture option. *B. A settlement option is exercised when an immediate annuity is purchased with the face amount at death or with the cash value at surrender.

Which of the following applicants would NOT qualify for a Keogh Plan?

A. Someone who works for a self-employeed individual. B. Someone who works 400 hours per year. C. Someone who has been employed for more than 12 months. D. Someone who is over 25 years of age. *B. A person must have worked at least 1,000 hours per year to be eligible for a Keogh Plan.

Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk the part of the insurance company?

A. Subrogation. B. Warranty. C. Aleatory. D. Adhesion. *C. An insurance contract is an aleatory contract in that it requires a relatively small amount of premium for a large risk.

An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called?

A. Tax-sheltered account plan. B. HR 10 plan. C. Profit sharing plan. D. 401(k) plan. *C. A profit sharing plan is one where the employer will contribute monies into an employee's retirement plan when the company shows a profit. The others are all qualified plans, but company profit isn't an issue with them.

Who must be licensed to sell, solicit and negotiate insurance contracts in the state of Indiana?

A. Temporary producer. B. Insurance producer. C. Insurance consultant. D. Limited Lines producer. *B. In the state of Indiana, an insurance producer is required to be licensed in order to sell, solicit or negotiate insurance.

Nonforfeiture values guarantee which of the following for the policyowner?

A. That the death benefit will be paid in a lump sum. B. That the policy premiums will never increase. C. That the cash value will not be lost. D. That the dividends will be paid annually. *C. Because permanent life insurance policies have cash values, there are certain guarantees built into the policy that cannot be forfeited by the policyowner. Nonforfeiture values give the insured the right to the cash value even if the policy lapses or is surrendered.

What may happen if the Commissioner determines that the insurance company knew about the producer's violation of the licensing law and did not report it?

A. The Commissioner will order an investigation of all producers in the company. B. The company may be fined up to $10,000. C. Nothing; the company is not responsible for the producer's actions. D. The company's license may be suspended or revoked. *D. If after a hearing the Commissioner determined that the producer's violation was known or should have been known to a partner, an officer or any manager of the company, yet it was corrected or reported to the Commissioner, the license of that company may be suspended, revoked or refused.

Who bears all of the invest risk in a fixed annuity?

A. The insurance company. B. The owner. C. The beneficiary. D. The annuitant. *A. 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.

All of the following statements concerning an employer sponsored nonqualified retirement plan are true Except?

A. The plan is not approved for favorable tax treatment by the IRS. B. The employer can receive a current tax deduction for any contributions made to the plan. C. The plan is a legal method of accumulating money for retirement needs. D. The plan can discriminate as to who may participate. *B. Employers do not receive a current tax deduction for any contributions made to a nonqualified plan. The plans are legal; however, they do not qualify for any favorable tax treatment under the IRS rules.

Which of the following is INCORRECT regarding a $100,000 20-year level term policy?

A. The policy will expire at the end of the 20-year period. B. At the end of 20 years, the policy's cash value will equal $100,000. C. The policy premiums will remain level for 20 years. D. If the insured dies before the policy expired, the beneficiary will receive $100,000. *B. Term policies do not develop cash values. All the other statements are true.

Which of the following is TRUE regarding the premium in term policies?

A. The premium is level. B. Only level term policy has a level premium. C. The premium in term policies is not based on the insured's age. D. Decreasing term policy will have a decreasing premium. *A. Regardless of the type of term insurance purchased, the premium is level throughout the term of the policy. Only the amount of the death benefit may change.

Which of the following may Not be included in an insurance company's advertisement?

A. Their policies' limitations or exclusions. B. The name of a specific agent. C. An identification of a limited policy as a limited policy. D. That its policies are covered by a state Guaranty Association. *D. It is illegal for insurers to state that their policies are guaranteed by the existence of a Guaranty Association.

Which of the following statements is True concerning the Accidental Death Rider?

A. This rider is only available to insureds over the age of 65. B. It is only available in group insurance. C. It will pay double or triple the face amount. D. It is also known as a triple indemnity rider. *C. The Accidental Death Rider pays 2 or 3 times the face amount if death is the result of an accident as defined in the policy and occurs within 90 days of such an accdient.

Which of the following terms describes making false statements about the financial condition of any insurer that are intended to injure any person engaged in the business of insurance?

A. Undercutting. B. Twisting. C. Slandering. D. Defamation. *D. Defamation is making statements that are false as to the financial condition of any insurer and which are calculated to injure any person engaged in the business of insurance.

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. Unfair Discrimination. B. Defamation. C. Illegal. D. A legal advertising strategy. *C. It is illegal to participate in any boycott, coercion, or intimidation that is intended to restrict fair trade or create a monopoly.

In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe?

A. Unidirectional B. Aleatory. C. Conditional D. Unilateral. *D. In a unilateral contract, the insured is not legally bound to do anything. The insurer, however, must pay losses covered by the policy.

When is the earliest a policy may go into effect?

A. When the first premium is paid and the policy has been delivered. B. When the insurer approves the application. C. After the underwriter reviews the policy. D. When is application is signed and a check is given to the agent. *D. 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.