Life and Health
A producer whose license is revoked or whose application for a license is denied will be ineligible to reapply for any license for at least
3 years. Any person whose license is revoked or whose application for a license is denied will not be eligible to apply for any license for 3 years.
Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe?
Adhesion
The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective?
As of the application date If the full premium was submitted with the application and the policy was issued as requested, the policy coverage effective date would generally coincide with the date of application.
A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this?
Level term A 20-year term policy is written to provide a level death benefit for 20 years.
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?
The insurer will pay the full death benefit from the group policy to the beneficiary. 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.
Under an extended term nonforfeiture option, the policy cash value is converted to
The same face amount as in the whole life policy. Under this option the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy.
Which of the following statements is TRUE about a policy assignment?
It transfers rights of ownership from the owner to another person. The policyowner may assign a part of the policy (collateral assignment) or the entire policy (absolute assignment).
An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What option does this describe
Reduction of Premium The Reduction of Premium option allows the policyholder to apply policy dividends toward the next year's premium. The dividend is subtracted from the premium amount, yielding the new premium due for the next year.
The Federal Fair Credit Reporting Act
Regulates consumer reports. The Federal Fair Credit Reporting Act regulates consumer reports, also known as consumer investigative reports, or credit reports.
Which of the following best details the underwriting process for life insurance?
Selection, classification, and rating of risks The underwriting process is accomplished by reviewing and evaluating information about an applicant and applying what is known of the individual against the insurer's standards and guidelines for insurability and premium rates.
How many accounts must the Illinois Life and Health Insurance Guaranty Association maintain?
2 accounts: life insurance and health insurance The Association is composed of all insurers who lawfully do business in the state. It assesses members according to the lines of business they transact, and maintains 2 separate accounts: Life insurance (which includes life insurance and annuities) and Health insurance.
If a person applies to become a life insurance producer, what is the minimum number of hours of prelicensing education that must be completed in a classroom?
7.5 A prelicensing course is required for those who wish to become producers. The total of 20 hours of prelicensing education is required for life insurance producers, 7.5 of which must be completed in a classroom setting.
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?
Aleatory 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.
Which of the following entities ultimately decides if an advertisement is complete and truthful?
Director The Director has the power to determine whether an advertisement is clear, truthful, and complete.
The Replacement Regulation minimizes
Misrepresentation. The Replacement Regulation requires that certain steps be followed in the replacement of insurance policies, in order to make sure that policyowners receive the information they need to make decisions that reflect their own best interest. It also minimizes the opportunity for misrepresentation and incomplete disclosure.
Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report
Must be informed of the source of the report. Under the Fair Credit Reporting Act, if an insurance policy is declined or modified because of information contained in a consumer report, the consumer must be advised and provided with the name and address of the reporting agency.
An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident, and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do?
Pay a reduced death benefit The incontestability clause prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years. However, it does not apply to statements relating to age, sex and identity.
Another name for a substandard risk classification is
Rated. Substandard risk classification is also referred to as "rated" since these policies could be issued with the premium rated-up, resulting in a higher premium.
Methods used to pay the death benefits to a beneficiary upon the insured's death are called
Settlement options. Settlement options are methods used to pay death benefits to a beneficiary upon the insured's death.
Which of the following determines the length of time that benefits will be received under the Fixed-Amount settlement option?
Size of each installment 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.
In the event a licensed producer dies, a temporary license may be issued to the deceased producer's representative. This temporary license will allow the licensee to do all of the following EXCEPT
Solicit insurance. The purpose of a temporary license is to allow the business of the deceased to continue until it can be sold, transferred, or another person be properly licensed.
Which of the following information will be stated in the consideration clause of a life insurance policy?
The amount of premium payment The consideration clause states that the value offered by the insured is the premium and statements made in the application, so it will include the information about the amount and frequency of premium payments
Which is NOT true about beneficiary designations?
The beneficiary must have insurable interest in the insured. A beneficiary is the person or interest to whom the policy proceeds will be paid upon the death of the insured. Beneficiaries do not have to have an insurable interest in the policyholder.
If a nonresident if applying for a license in Illinois and his home state does not require continuing education for Illinois residents,
The continuing education requirement will be waived in Illinois. The continuing education requirement is waived if the home state does not require continuing education for Illinois residents.
Which type of life insurance policy allows the policyowner to pay more or less than the planned premium?
Universal life The policyowner has the flexibility to increase the amount of premium going into the policy and to later decrease it again. In fact, the policyowner may even skip paying a premium and the policy will not lapse as long as there is sufficient cash value at the time to compensate for the nonpayment of premium.
Producers who broker insurance must file a bond along with the application for license. The bond must be issued in favor of the people of Illinois, and must be on a continuous form and for an amount equal to 5% of the premium brokered the previous year, NOT to exceed
$50,000 The bond must be conditioned upon full accounting and due payment to the person or company entitled there to funds coming into the producer's possession as a result of any insurance transaction covered by the producer's license.
Which is TRUE about the cash surrender nonforfeiture option?
Funds exceeding the premium paid are taxable as ordinary income. The insurers surrender the policy at its current cash value. Only any excess of value is taxable as income. Once the policyholder opts for cash surrender, the policy is immediately inactive
Which of the following is an eligibility requirement for all Social Security Disability Income benefits?
Have attained fully insured status Although Social Security offers many benefits, such as retirement, survivors and Medicare, only those who have attained fully insured status are eligible for Disability Income benefits. Contributing to Social Security for 40 quarters (10 years) attains fully insured status.
An insured purchased a Life Insurance policy. The agent told him that depending upon the company's investments and expense factors, the cash values could change from those shown in the policy at issue time. The policy is a/an
Interest-sensitive Whole Life. Because the cash values are generated by investments, interest rates will affect the amount of the cash value.
A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this?
Level term A 20-year term policy is written to provide a level death benefit for 20 years.
Which of the following is NOT considered a misrepresentation as it pertains to unfair trade practices?
Making comparisons between different policies Making accurate comparisons of policies is not illegal.
Ron's application to become an insurance producer has been denied. What is the soonest possible time that he can apply again?
3 years A person whose license is revoked or whose application is denied is ineligible to apply for any license as an insurance producer for 3 years after the revocation or denial, nor may such person be employed, contracted, or engaged in any insurance related capacity during the time the revocation, suspension, or denial is in effect.
