LIFE & HEALTH EXAM
Coinsurance helps control over-utilization of benefits.
TRUE
Employee contributions are ALWAYS immediately vested. Vesting schedules don't apply to the employees' contributions.
TRUE
HMOs rarely have deductibles, but PPOs normally function with deductibles.
TRUE
Level term remains at a level face amount with increasing premiums at renewal.
TRUE
Medical Expense policy pays benefits on a cost-incurred basis only.
TRUE
On a graded premium whole life policy, the premiums start low, increasing each year during the early years of the contract and then remain constant for life.
TRUE
Optional Probationary Period provisions in a health policy protects an insurance company against pre-existing conditions
TRUE
Optional probationary period provision in a health policy protects an insurance company against pre-existing conditions
TRUE
Premiums for nonpar policies are usually lower than for participating policies.
TRUE
Pure risk involves only the chance of loss, therefore only pure risks are insurable.
TRUE
a Medical Expense policy pays benefits on a cost-incurred basis only
TRUE
a variable life insurance policy provides a guaranteed minimum death benefit.
TRUE
industrial policies are more expensive than ordinary policies mainly for marketing and administrative reasons.
TRUE
morbidity has to do with health insurance, not life insurance.
TRUE
An agent has fiduciary responsibility both to his client as well as his company.
TRUE... fiduciary responsibility is the care needed in offering financial advice.
A prospect's statements made in the application for insurance constitute CONSIDERATION.
TRUE...Yes... the answers in the application plus the initial premium are known as the consideration.
Blue Cross is considered a service organization
TRUE...You need to know that service providers function differently than health insurance companies. Blue Cross is a service organization.
An agent replacing an existing policy from another company with one from his own company which is of no financial advantage to the insured is guilty of:
TWISTING
What's the special class of retirement plan available to employees of certain nonprofit charitable organizations?
Tax-deferred annuity
In health insurance, a small employer is one with a maximum of ______ employees.
50
How soon after moving must an agent change their address with the Florida DFS?
60 days
Under a family plan policy, the child rider is usually what type of insurance?
Term
What is the type of insurance that would not make a good retirement vehicle?
Term
Which is the basic coverage issued to an eligible member under the Servicemember's Group Life Insurance (SGLI) program?
Term insurance... is the least expensive and provides coverage for a fixed period of time (enlistment) of the service personnel.
Gretta purchased a fixed annuity for $15,000 that has an expected return of $20,000. It will have an exclusion ratio of:
The $15,000 she put in (cost basis) divided by the expected return of $20,000 is .75 or 75%.
All of the following retirement plans automatically qualify for a federal income tax deduction:
A. Corporate pension plans B. 403(b) C. SEP
The nonforfeiture options include all of the following:
A. cash surrender payment. B. reduced paid-up insurance. C. extended term insurance.
Accidental death or double indemnity provisions will usually pay an additional amount equal to the face amount if the insured dies from?
Accident
What's it called when you have a small premium and a big benefit?
Aleatory
Which of the following provisions establishes one of a health insurance policyowner's rights of ownership? Change of Beneficiary, Legal Actions, Entire Contract, or Payment of Claims
CHANGE OF BENEFICIARY
What provision in industrial life policies allows the insured to exchange several policies for one policy?
Conversion rule
Who regulates retirement plans in Florida?
ERISA
Can an agent write business with a company they are not appointed with?
If it is considered excess or rejected business
With a universal life policy, reserves are usually invested in:
Long term securities because of the requirements of the reserve system.... stable and conservative investments.
Which mandated once and for all that insurance would be regulated by the states, and made possible the application of anti-trust laws?
McCarran-Ferguson (1945)
Coinsurance helps control over-utilization of benefits
TRUE
What the MIB does is hold down the cost of life insurance for all policy owners through the prevention of misrepresentation and fraud.
TRUE
The consideration clause states which of the following?
The amount and frequency of premium payments...Note that it says "consideration clause" and not just the word consideration. The word "consideration" by itself means the application and the initial premium together.
Under a typical HMO plan, each member pays:
a fixed premium whether or not he/she uses the health plan.
With a key employee insurance policy, who is normally the beneficiary?
The business
A man stated he was age 43 at the time of application. He died 6 years later, at the time of death the company found out he was 47 at issue. What is the insurance company's obligation in regards to paying this claim?
The company just adjusts the benefits to be what the premium should have purchased.
After a group life master policy has been issued, what action may the insurer take on future policy anniversaries?
The company may adjust the premium, and they often do, at anniversary time on a group policy.
After a group life master policy has been issued, what action may the insurer take on future policy anniversaries?
The company may adjust the premium, and they often do.
What's a Lump Sum Benefit?
$255, only surviving spouses or eligible children may receive this benefit.
If there is a violation of a cease and desist order, the insurance commissioner can order a fine up to?
$50,000
A standard risk submits an application requiring a medical exam and receives a conditional receipt for his premium. This conditional coverage is first effective:
It says "requires a medical exam" so we know that it can't be approved until something happens, and that something is the medical exam.
Julio wants income for life. At his death, he wants his wife Maria to continue to receive income for the rest of her life; he chooses a:
Joint & survivor annuity.
Martha wants to receive income for life. At her death she wants her daughter to continue to receive the income for her life. Martha chooses:
Joint and last survivor
What are three forms of term insurance?
Level, Decreasing, and Increasing
Regarding life insurance and health insurance:
Life is a valued contract, health a reimbursement contract
A currently insured worker covered under social security is entitled to what?
Limited death benefits
What is the period of time specified in the suicide clause?
1 or 2 years
Zeke has decided he needs permanent life insurance but doesn't want to pay premiums for a long period of years. What kind of insurance would be a correct choice?
Limited pay whole life
Name a reimbursement contract
Medical expense
An Annuitant receives monthly payments from a variable annuity under a joint and 2/3rds to the survivor option. If the primary annuitant dies, what will the surviving annuitant receive?
Monthly payments for life of a dollar value of two thirds of the annuity units that were previously being distributed.
Both life and health insurance use the same factors determining premiums except:
Morbidity
On a reinstated health policy, how long after the policy is reinstated will coverage for sickness become effective?
10 DAYS
Under a partnership cross-purchase plan, when there are 4 partners, how many policies are needed?
12...Yes... each of the partners buy one policy on every other partner but does not buy one on themselves. (Number of partners) times (number of other partners not counting themselves). 4 x 3 = 12.
An annuitant receives $1200 a month, the value of each annuity unit is $6, How many annuity units did he receive?
1200 divided by 6 = 200
In Florida, Medicare Supplement policies require a free look. How long is it?
30 days
What is the length of the grace period (how long to pay) on a life insurance?
30 days is the minimum grace period, 4 weeks if it's an industrial policy
Insurer can delay payment of a cash surrender for:
6 months
When is the latest one may start saving in a Traditional IRA?
70 1/2 ... Yes, start one. When is the latest you can start a Roth? No limit!
The term "first dollar" often is used to describe benefits payable by which type of policy?
A BASIC MEDICAL EXPENSE PLAN
What's included in an Outline of Coverage?
A brief description of the benefits and coverages A summary of the renewal and cancellation provisions A summary of the exclusions
An individual requests a quote for an identical amount of insurance in four different policies. Name a policy that usually has a higher initial premium.
A participating Whole Life Policy
What is required by the Florida Replacement Rule?
A written comparison and summary statement
What is required by the Florida Replacement Rule?
A written comparison and summary statement...Yes, but only if the policy holder requests it.
A "joint and survivor" annuity may have all the following characteristics:
A. a predictable monthly income for life for two people based upon an interest rate in effect at the time it is annuitized. B. a variable monthly lifetime income for two people based upon the performance of the annuities mutual funds. C. the payout may be reduced to the survivor to allow more income while both are alive.
Annuities can be designed to provide all the following except:
A. a stable and predictable monthly income for the remainder of the annuitants life. B. a variable monthly income based upon the value of a fixed number of mutual fund units being retired monthly. C. a regular monthly income from previously committed funds which do not require any decisions by an infirm or senile annuitant.
To qualify for federal tax purposes, a defined benefit plan must meet all of the following basic requirements:
A. a systematic payment of benefits. B. definitely determinable benefits. C. primarily retirement benefits.
the following will be in the outline of coverage?
A. discussion of benefits and coverages B. principle exclusions or limitations C. renewal and cancellation provisions
The value of a separate account in an annuity during payout is determined by:
Annuity units
At what age must owners of Traditional IRAs begin to receive payments from their retirement funds?
April 1 of the year following the year they become 70 1/2
Why were variable annuities developed?
As a hedge against inflation...it was a group of teachers preparing to retire who caused this product to be "invented."
What is the stop loss point in Medicare?
NONE
Give 3 statements about Blue Cross and Blue Shield
Blue Cross & Blue Shield are voluntary not-for-profit organizations. Blue Cross is designed to cover hospital expenses. Blue Shield is designed to cover doctor expenses.
The NASD regulates personnel selling variable annuities as:
Broker/dealers...The newer term is FINRA which is the merging of the NASD and the regulatory committee of the NY Stock Exchange.
nonforfeiture options include:
Cash surrender payment. Reduced paid-up insurance. Extended term insurance.
What must occur before non-forfeiture options can be used?
Cash values must accumulate...We have to have some money in the plan before we can use the options. You can't lose (forfeit) something if there is nothing there to lose.
Insurance involves only:
Chance of loss
Whitmore is 44 years old and decides to start receiving payments from his annuity, how can he avoid paying a penalty for early withdrawal?
Chooses life income option
If a company's limit of risk on a single life is $500,000, any application in excess of $500,000 would be:
Considered excess
Endowment proceeds even though left with the company at maturity under an interest only option, will be partially taxable under:
Constructive receipt rule
If each partner purchases policies on the other partners, it is what type of plan?
Cross purchase plan
The form of insurance designed to cover the liability of a borrower with an amortized loan is:
Decreasing Term...The principal amount of the loan is continually decreasing, so our insurance coverage should also be decreasing.
Under a payor provision, what happens if the child covered under the policy becomes disabled?
Nothing...The payor provision is for the protection of the payor - the adult paying for the policy, not the child.
Which clause allows an insurance company to deny coverage if death results from a war?
Exclusion clause
Major medical policies may include a type of deductible where the insured pays a new deductible amount for each different event that causes medical expenses to be incurred. This is the:
PER-CAUSE DEDUCTIBLE
Explain the difference between what a general agent does as compared to a PPGA?
PPGA's primarily sell, general agents recruit, train, etc.
An annuitant selects a life with period certain as his annuity option, what will he receive?
Payout for life or fixed number of years whichever is last
How is the policy loan repaid if the policy pays a death claim?
The loan, plus any interest due, is deducted from the death benefit.
The annuity option which will not cover life's contingencies is called:
The period-certain option
Is not usually offered as a dividend option
Policy loans (they have nothing to do with the dividend options)
In March, farmer Brown needs $250,000 of permanent life insurance. He is "cash poor" until fall harvest. The solution to his problem is:
Preliminary Term for interim coverage. There is no maximum dollar amount mentioned in the book, and it works for up to 11 months.
Employees from this type of organization generally may participate in Tax Deferred Annuity plans (TDA).
Public school systems and other "Not for profit" groups.
A waiver of premium rider cannot be added to a term policy.
FALSE
Where are franchise life plans commonly used?
For groups smaller than the minimum number required by state law
An insurance company incorporated in and whose home office was in New Mexico, while doing business in Florida would be considered?
Foreign...This exact question was on the state test... using New Mexico. New Mexico is a state in the USA and that makes it foreign by this definition. There are two other locations that are used in this question: Puerto Rico, and Guam. Both of those are also in the US and that makes them "Foreign" as well. Inside the US but outside Florida.
A Roth IRA participant must start taking distribution by what point in his/her life?
He/she is not required to take the distribution...because there will not be any tax due since it was paid for with after tax dollars originally. No tax due. Thus the IRS doesn't care when or if it is withdrawn.
Which are the most important aspects of qualified retirement plans to employers?
I. Attracting & retaining key employees II. Increased productivity III. Retiring employees humanely
When determining premium rates, factors to be considered are:
I. age & sex of the applicant. II. insurability of applicant if substandard. III. whether it will be participating or nonparticipating. IV. size of policy.
All of the following are non-forfeiture options:
I. cash values II. extended term III. reduced paid up
How do HMOs emphasize preventive care?
I. encouraging routine physical exams II. diagnostic screening
To be an association allowed to purchase insurance in Florida, which of the following apply?
I. must be a natural group II. been in existence at least 2 years
An annuity contract provides?
Income for life
Where would information about a prospective insured's lifestyle be found?
Inspection report
A modified whole life policy:
Starts with lower premium that increases over life of policy.
What is the success of variable annuities in the market place based on?
Stock/equity market because it outperforms fixed investments
Mary wishes to have her annuity pay her until her death, with no further payments to anyone. What type of annuity should she get?
Straight life annuity
If an insured wants to convert several industrial life policies to a single ordinary life policy, the combined face value of the industrial life policies must be
$3,000 or more
Zoltan accumulated $60,000 in his annuity. He is receiving $600/month, each unit is worth $3.00. How many units does he receive each month?
$600 divided by 3.00 = 200 units. The words "each month" are important here because then we don't need to use the $60,000 figure.
In a group plan, what conversion rights belong to a surviving spouse?
The same conversion rights that belonged to employee
What are blanket life policies?
They cover a group of people exposed to a common hazard.
When a variable annuity purchaser reaches retirement, what percent of the total value of all accumulation units credited to her account is converted to annuity units?
This is a little bit of a strange question, just to get you thinking. All that happens when an annuity goes from the accumulation period to the annuity period is that 100% of the accumulation units get converted to annuity units.
Maximum amount of insurance for dependents can be what percent of an employee's coverage in a group plan.
This is true. 50%.
How is a policyowner's cost basis determined for accumulated cash values in a life insurance policy?
Total premiums paid less-dividends, and loans received, less premiums paid for supplementary benefits
Hernando has a policy in which the cash values increased to a point where the corridor was utilized. What type of policy does he have?
Universal life option 1
What type of permanent plan has a "corridor?"
Universal life option I
The amount an employee can contribute to a SEP is:
Up to a maximum of $49,000
Mass marketing of insurance is best described as:
Uses print, TV and radio, e-mail
Life insurance is considered what type of contract?
Valued contract...because there is a specific value known. Indemnity is a similar concept to valued.
Wilson had a waiver of premium clause in his life insurance policy. He became disabled 8 months before turning 65. He was disabled for 48 months; how long will the company waive the premiums?
Waived for 42 months...With a 6 months waiting period, that leaves 42 months from the total. The book mentions a waiting period of 90 days or 6 months, but this is the only answer which fits that definition.
When does a tertiary beneficiary collect?
When the primary and secondary pre-decease the insured.
When is a statement of good health required regarding a life insurance policy?
When there is no premium with application
Must a health company return unearned premium on a cancelled policy?
Yes
An insurance company domiciled in Canada conducting business in Florida is considered:
alien
In the state of Florida, coverage for services provided by ambulatory surgical centers is provided by:
both individual and group health insurance
A plan, usually funded by life insurance, to purchase a deceased partner's share of a business is known as a:
buy and sell agreement...which is usually done by an attorney, is for handling the legal arrangements when a partner dies.
Ways in which employees may be classified for group life insurance include all of the following:
by department by Union or Nonunion status. by duties.
The Health Maintenance Organization concept that service providers are paid a fixed monthly fee for each member is called:
capitation
Under the uniform provisions law, which of the following provisions is optional for a health policy?
change of occupation
When insuring substandard life insurance risks, provision is usually made for the expected higher death rate by:
charging an additional premium
A joint & full survivor annuity pays a fixed income to two or more annuitants at the same time & ceases on the:
death of the last annuitant
Vesting for the employee from the employee's contribution will occur:
immediately
The Waiver of Premium:
is an option that may be rated or denied.
The moral hazard is characterized by:
laws and rules
Most business assignments of life insurance policies are made in order to protect the:
lenders financial interest in the insured.
In a disability policy, what factor when increased causes a decrease in benefits?
morbidity
Under a variable annuity policy, a paid-up deferred variable annuity will be issued when the:
premium payments are discontinued
The operating objective of a stock insurance company is:
profit for stockholders
A Standard Risk applicant is considered covered when:
the insurance company mails the policy (which had at least one months premium submitted with the application) for delivery.
Insurance policy rights and benefits always belong to:
the owner of the policy... it's good to be king
What is the stop loss point in Medicare?
there is no stop loss point in Medicare.
A policy will not be reinstated if it has been:
Surrendered for its cash value...surrendering means cashing in which means over and done with!
A joint and full survivor income option on an annuity will pay until when?
the second annuitant dies
benefits that can be included in a group health plan
Medical insurance Disability insurance Accidental death and dismemberment insurance
Characteristic of an annuity
A. To provide against the risk of living too long B. Designed to lessen the depletion of the retirement fund D. To provide an income stream
How soon must the cash surrender values become available to the insured?
6 months
Which best describes the difference between career general agents and PPGA's?
Career GA's primarily recruit & train, PPGA's primarily sell
An agent who writes controlled business must write how much business to the public?
Equal amount
VGLI insurance is 5 year renewable and convertible term insurance.
TRUE
Legal reserves show on the balance sheet as:
future liabilities
If there is a violation of a cease and desist order, the insurance commissioner can order a fine up to?
up to $50,000...The state seems to like this number as they use this potential fine in more than one place.
Under social security, when does the black-out period begin for a surviving spouse?
when the youngest child becomes 16
The rejected business rule is:
where the agent's company refuses to sell the policy.
An annuity owner receives $1000.00 a month, and value of each annuity unit is $2. How many units did he receive monthly?
$1000 divided by $2 = 500 units
An annuity is purchased for $10,000, the expected return is $20,000 what amount is taxable if it pays $300 month?
$150
Under a SARSEP, the maximum contribution that can be made on an employee's behalf is:
$16,500...It's true, but if you don't have a running SARSEP, you can't start one now. This number is correct if you had a SARSEP plan up and running before 1997 when the SARSEP was discontinued. (It was replaced by the SIMPLE plan.)
Orville has a major medical policy with a $500 deductable, 80/20 co-insurance, and a stop loss of $5,000. He has hospital bills of $9,500. What will his out of pocket expense be?
$2,300...9,500 - $500 = $9,000 x 20% = $1,800 + $500 (add it back in) = $2,300. You don't need to use the stop loss on this one because the "out of pocket" doesn't go high enough. Remember when you were in the 9th grade and you had word problems in math? They always seemed to give you information in the problem you didn't need to know. Same here. Watch out for that.
With the exception of instances of legal incapacity, Proof of Loss for Surgical Expense benefits must be furnished to the insurance company within ______ after receiving the forms from the company.
90 DAYS
If an insured wants to convert several industrial life policies to a single ordinary life policy, the combined face value of the industrial life policies must be
$3,000
Mr. Ed cashes in his policy. He had paid $6,000 in premium and received $9,400 in cash surrender. How much is taxable?
$3,400...It is the difference between the principal and the total value. Subtract the two. The remainder is taxable at the ordinary income rate.
For a risk to be insurable, it must have:
A definite loss & A reasonably predictable loss
If an agent accepts a premium for a lapsed disability policy, coverage for ILLNESS becomes effective in how many days after the acceptance of the premium?
10 Days
On a reinstated health policy, how long after the policy is reinstated will coverage for sickness become effective?
10 days
Which group is not eligible to purchase group life in Florida?
A family group
In Florida, what is the highest fixed policy loan interest rate a company can charge?
10%...It doesn't mean that all companies are going to use this figure all the time or any of the time, but it is the maximum allowed.
"Preliminary term for interim coverage" policies have a maximum benefit period of ________ ?
11 months...Here's what you need to know. There are two kinds of situations which are close to the same place in the book and both sound similar. This is one, and the answer is 11 months maximum time, without specifying any $$$ amount. The other is called a temporary insurance agreement within the category of binding receipts. The limits of a temporary insurance agreement are $100,000 coverage for no longer than 60 days. Keep the two straight.
If a policy holder decides not to keep their policy, they may return it and receive a full refund within:
14 Days...Florida requires a 14 day free look. If any company gives a longer one, that's fine. Florida assumes in the test that all free look provisions are FOURTEEN DAYS.
An agent who holds a life insurance license and a securities license is required to wait how many days after giving a notice (proposal) to the policyowner that a replacement of cash value is taking place?
15 Days
A life insurance policy becomes incontestable, even in cases of fraud after?
2 years...ATTENTION: watch out for a problem here. Notice this question said "after" which is correct. The state exam has also been known to say "when" rather than "after." If that is how the question is stated, your answer is: TWO YEARS AND ONE DAY FROM THE INCEPTION OF THE POLICY.
Which one is the policy that is paid up early and endows at age 100?
20-pay life...The premiums are only paid for 20 years and then it sits... And endows at 100.
What are the Continuing Education requirements for a life and/or health agent?
24 CREDIT HOURS EVERY TWO YEARS
What are the Continuing Education requirements for a life and/or health agent?
24 credit hours every two years
What are the number of employees needed by a corporation to set up a group variable annuity?
25
The grace period for life insurance policies is:
30 days...Yes, one month, but no less than 30 (February doesn't count).
A fully insured worker covered under Social Security needs how many quarters of reported income?
40 quarters. Let me point out one other thing. I used the word "reported" here because it is correct. The book uses the word "earned" because the book assumes that everyone who has an earned income is reporting it. You and I know that isn't the case.... my youngest client was a 14 year old baby sitter who had an earned income but was not reporting it. The reason I bring this up is that on the state test, when it says "earned" ... you are to assume they mean "reported" ... ok?
At what age can a person start to collect from his Traditional IRA without penalty?
59 1/2
A tax penalty is imposed if a healthy person takes receipt of his Traditional IRA funds before age:
59 1/2...The window starts at 59 1/2 to begin receiving benefits. It doesn't have to begin then, but it can. It must begin by April 1st of the year following the year he/she turns 70 1/2.
Under the waiver of premium, if the company agrees that the insured is totally disabled the waiting period is how long?
6 Months... The book says usually 90 days or 6 months. This question is designed to make it a little harder for you.... it would have been easy to have one of the answers be "90 days or six months" which is a direct quote from the book. The state test is not quite so helpful, so I'm not either.
How long can companies postpone payment of cash surrender values?
6 months..The companies have that right. Surprise.
A Temporary Insurance Agreement can be written for a period of up to:
60 DAYS
How soon after moving must an agent change their address with the Florida DFS?
60 DAYS
Under Medicare Part A, a benefit period starts when a patient enters the hospital and ends when a patient has been out of the hospital for:
60 DAYS
A Temporary Insurance Agreement can be written for a period of up to:
60 days, and up to $100,000 of coverage. This is also known as a Binding Receipt.
The rule of constructive receipt allows for how many days to make a determination?
60 days...The endowment contract endows. The owner has 60 days in which to do something with it... set it into a payout mode like an immediate annuity... or settle up with the IRS for all taxes due.
Which group is not eligible to purchase group life in Florida?
A family group...Family groups are not included as a "natural" group. They are not permitted to buy insurance for their family members. That would be known as a fictitious group.
How are interest rates for a whole life policy's cash values determined?
A formula determined by the company
An individual accidental death and dismemberment policy will pay benefits if an insured dies from:
A head injury resulting from an auto accident...a little misleading. The head injury has nothing to do with it. It was a death due to an auto accident.
Which of the following promises full income for the lifetime of two annuitants?
A joint and full survivor life annuity...these are the right words as used in the text to describe a joint annuity for two people.
What is an Open-Panel HMO
A network of physicians who work out of their own offices and participate in the HMO on a part-time basis.
What is a cancellable policy?
A policy the insurer may cancel at any time by returning the unearned premium.
A deferred compensation plan is:
A salary reduction...This is a tough question with powerful answers. I'm quite pleased with my question! Here's why: You need to see that an employee is not receiving all of their salary at the time... some is deferred to the future, and therefore, in effect, their salary is reduced from what it would have been... but they will get it later. Less taxes now.
All are true about juvenile policies:
A. The policy is usually owned by the applying adult. B. The policies may be Ordinary or Industrial types. C. A special form of juvenile policy may multiply the face 5 times when the child reaches majority.
All of the following are dividend options:
A. Cash B. Paid up additions C. 5th dividend option
All of the following are purposes of the entire contract provision of an insurance policy:
A. Describes the contract cannot be changed after it has been issued B. Prohibits the insurance agent from altering any of the terms or conditions of the contract C. Protects the insured against any attempts by the insurance company to alter the agreement by referring to other documents, such as the company underwriting manual
Ordinary Life policies must include the following provisions:
A. Entire contract Clause (Application included). B. Consideration Clause. C. Suicide Clause.
All of the following will determine the dollar value of variable annuity units:
A. Investment results from the annuity portfolio of common stocks B. Mortality expense C. The expenses of running the company
All of the following are defined contribution plans:
A. Money purchase plans B. Profit sharing plans C. Stock bonus plan
Qualified corporate retirement programs must meet all the requirements:
A. Must be for the exclusive benefit of employees. B. Life insurance benefits must be incidental to retirement benefits. C. Cannot be discriminatory by sex.
All of the following statements are true about universal life policies:
A. Premiums can be increased or decreased B. The death benefit can be changed C. Cash values can be allowed to pay premiums
Regarding taxation of life insurance:
A. Premiums paid by an employer can be deducted by the business B. No current taxation as cash value builds each year C. Policy proceeds owned by decedent are included for estate taxes
What are some examples of what is considered to be a needs approach?
Final expense fund Disability income Monthly income
The following are all requirements for payment of Social Security disability benefits
A. Total disability for at least five months B. Fully insured and disability insured C. Expected disability of 12 months or longer or ending in death
All are true features of variable life insurance:
A. Variable life is regulated by the State & the S.E.C. B. The owner may balance the risk of loss with the desire for gain. C. The cash values are determined by the value of underlying mutual funds selected by the owner.
The option that one party can set aside a contract refers to the:
A. aleatory concept. B. voidable concept. ...Yes, both.
Ways in which dividends may be used by the policyowner include the following:
A. applied to reduce the premium. B. left to accumulate with interest. C. used to buy additional paid-up insurance.
All the following types of insurance companies may be approved to operate in nearly all states:
A. fraternal insurance companies. B. mutual insurance companies. C. stock insurance companies.
Variable annuity options often include all of following:
A. income for life. B. a specified period of time. C. beneficiaries.
All are true about an endowment policy:
A. it has a high premium cost per dollar of face value. B. it is an Insured Savings Plan. C. the cash value and the face value are equal at the endowment date.
The following statements about universal life are true:
A. it is a contract containing a cash value account from which current mortality costs are drawn monthly by the insurer. B. the maximum mortality charges against the cash values permitted by the insurer are disclosed in the policy and are based upon industry tables. C. the interest rate credited to the cash value is variable, and responds to the fluctuating market rates, but usually is guaranteed for an initial period.
All the following are available settlement options:
A. life income without a refund. B. lump sum distribution of the face value. C. life income with 10 years certain.
The use of an irrevocable beneficiary option may do all the following:
A. limit the owners normal ability to exercise all her policy rights. B. protect the rights of an alienated beneficiary. C. restrict the owner in the use of the loan values in the policy.
All the following are true about guaranteed renewable term insurance:
A. no medical evidence of insurability is required at renewal. B. the incontestability clause is not renewed. C. the face value of the policy normally remains the same.
All the following are correct about an individual disability policy:
A. probationary period is a one time period B. benefits are received tax free C. elimination period is chosen by the insured
All of the following types of life insurance provide a suitable base for a retirement plan:
A. straight life. B. variable life. C. limited pay whole life.
The insuring clause includes all the following:
A. the name of the insured. B. the face amount of the policy. C. the name of the insurer
The agent has all of the following types of authority from his agency contract:
A.Expressed authority is what the contract spells out. B.Implied authority is not written but needed to perform as an agent. C.Apparent authority is what the public assures the agent possesses.
Ordinary Life policies must include the following provisions EXCEPT: Entire contract Clause (Application included), Consideration Clause, Suicide Clause, Accidental Death Rider.
ACCIDENTAL DEATH RIDER
Accidental death or double indemnity provisions will usually pay an additional amount equal to the face amount if the insured dies from?
Accident...If a person dies as a result of an accident, the face value is doubled as in "double indemnity."
From the annuity contract issue to the start of payments is called:
Accumulation period
From the annuity contract issue to the start of payments is called:
Accumulation period... building the "estate" in the annuity.
In order to comply with the Fair Credit Reporting Act, at which of the following times must an agent notify an applicant that a credit report may be requested?
At the time of application
This part of the application provides information about an applicant such as financial condition, character, purpose of sale, and how long the agent has known the applicant.
Agent's report...This is a little bit confusing because you will also find in the inspection report, information about the financial condition and character of the applicant. What gives this one away is the purpose of sale and how long the agent has known the applicant. You can't find those two things anywhere else. This is also known as Part III on the application.
Which concept refers to the fact that the value given by the two parties is unequal?
Aleatory contract...aleatory means that there is risk on both parties... it is probably never going to be fair to both at the same time.
An insurance company will grant an advance from the face value of a life insurance policy when the policyowner uses which of the following?
An accelerated benefits rider.
What portion, if any, of a fixed dollar life annuity payable to a retired worker is not taxable?
An amount determined by the exclusion ratio
For tax purposes which would be considered a key person?
An officer of the company
What type of insurance is most frequently used in group life plans?
Annual renewable term
Who is entitled to a paid up deferred variable annuity?
Annuitants who discontinue premium payments
Before variable annuity benefits can be paid out, accumulation units must be converted to:
Annuity Units
When an agent is provided materials from his/her company, which category of authority is the one which allows those items to be used?
Apparent...Apparent authority is that which gives the agent the right to do things as a result of material supplied... a price book, brochures, etc.
The uniform simultaneous death act governs situations in which the insured and primary beneficiary dies in the same accident and there is no evidence as to who died first. Under the act, what presumption is made in this case?
Beneficiary died first...Notice how this is worded differently than the usual way of looking at this situation. Normally, we would say that it is designed so that the insured died last. Here, that isn't one of the answers. Logically, it would be necessary for the beneficiary to die first, thus the insured died last.
A money purchase plan provides for:
Fixed contributions/undefined benefits
The Health Maintenance Organization concept that service providers are paid a fixed monthly fee for each member is called:
CAPITATION
An agent who solicits to sell to an individual who has difficulty understanding the agent violates which essential element of the contract?
COMPETENT PARTIES
Keoghs are similar to what type of retirement plan?
CORPORATE PLANS. NOTE: they are for non-corporations... un-incorporated businesses. In the book, the words "corporate plans" seem to stand out three times in three bullets. In reading carefully, you will see they are referring to being "similar" to corporate plans but in fact, are for non-corporations. Good test question because of that. By the way, Keogh plans can be like Defined Contribution plans or Defined Benefit plans.
The main difference between traditional life insurance and variable life is:
Cash values...Yes, it's where the cash values are located and how they are controlled. With traditional life insurance, the cash values are with the company general account. With a variable life policy, the cash values are in a "separate account" which requires a securities license to sell.
Employees in group life insurance plans receive which of the following as evidence of their insurance?
Certificate of insurance
Which provision establishes one of a health insurance policyowner's rights of ownership?
Change of Beneficiary
Mr. Roberts assigns a $100,000 policy and has a $50,000 mortgage. Mortgagee and assignee receive a check payable jointly. What type of agreement is this?
Collateral assignment...The key word here is "jointly."
An agent who solicits to sell to an individual who has difficulty understanding the agent violates which essential element of the contract?
Competent parties
Mr. Whistle buys an immediate annuity at the age of 63. When he turns 65, he decides to stop the annuity, get a refund of the remaining amount, and move to Guatemala. What is the response of the annuity company?
Continue sending the monthly checks as before...They will explain and be as polite as possible, but they will advise that nothing is going to change. The agreed upon sum will continue to arrive in his mailbox until his death.
What does the conversion clause provide a terminated employee under a group plan?
Coverage for 31 days
Which life insurance proceeds option provides equal payments for a specific time to a named beneficiary?
Fixed period
The gross premium for a life insurance policy is made up of all the following elements:
I. Expense loading II. Interest III. Mortality costs
The form of insurance designed to cover the liability of a borrower with an amortized loan is:
DECREASING TERM
A company purchases life insurance on its partners. This is called ______ ?
Entity type... When the entity (corporation or partnership) buys the policies, the entity only purchases the number of policies as there are numbers of partners. One for each. It is known as entity purchase or entity type as opposed to cross purchase.
Continuing to buy when the stock market levels are fluctuating, thus tending to average out the cost of units during the pay-in period is called:
Dollar cost averaging
If an agent converts premium he collects for his personal use, he can be charged with:
EMBEZZLEMENT
Samantha bought a policy at age 30 and was told that she had to pay premiums for 20 years. At the end of 20 years she received an amount equal to the face amount. What type of policy is this?
Endowment...This is a little bit tricky so let's work through it. Notice that the question says "equal to the face amount." That means this endowment contract has a set face amount but only pays if the owner is living at the end of the endowment period. (Unbelieveable, but true.)
A cost involved in determining premium rates is called the loading charge. This is also known as:
Expense factor
An insurable interest must exist between the policyowner and the insured at the time of the claim.
FALSE
Proceeds paid to a named beneficiary in a lump sum, are subject to federal income tax?
FALSE
individual disability policy premiums are tax deductible
FALSE
An agent can sell variable annuities as long as they hold a valid life insurance license in the state of Florida.
FALSE...It is necessary to also have a Series 6 or Series 7 securities license in the State of Florida in order to sell variable annuities.
Under a group permanent plan, the employer pays for the cash value segment of the policy and the employee purchases the insurance portion.
FALSE...the definition in this question is called split-dollar insurance. This is a difficult question, but points out the differences between group permanent and split dollar.
Flash Gordon, aged 62 has been paying premiums for many years on his Whole Life policy, which now has a cash value of $19,420. If Flash decided to drop the policy, which of the following would apply?
Flash could elect to surrender his policy for a lump-sum cash payment of $19,420.
A characteristic of a universal life policy
Flexible premium and adjustable benefits
Which are characteristics of a universal life policy?
Flexible premium and adjustable benefits
A non-profit entity that has a lodge system, includes ritualistic work and maintains a representative form of government is called:
Fraternal benefit society
Eduardo gets fired May 16th and dies May 27th. Under his group policy what would the insurer pay?
Full Face Amount...Eduardo's beneficiaries would receive the full face value because he has coverage for 31 days after leaving his employer.
The primary insurance amount (PIA) is equal to:
Full worker's retirement at 65
According to the needs approach, when selling insurance which factor is not considered important?
Future income
According to the needs approach, when selling insurance which factor is not considered important?
Future income.... and this is a little misleading perhaps... but it is the best answer.
The coordination of benefits (COB) clause is found in what kind of policy?
GROUP POLICIES
Which policies are required to coordinate benefits?
GROUP POLICIES
What is a standard provision in all life insurance policies?
Grace period
Qualification for association group life requires which of the following?
Group has been in existence for a certain number of years...and the certain number of years is 2.
How are pension plans benefits payable?
I. Expressed as fixed dollar amount II. Based on a percentage of compensation before retirement III. Based on years of service
If the only difference in life insurance premiums for men and women is based on the fact that women are expected to live longer, then the premium for men's life insurance should be:
HIGHER because the policy, in effect, won't last as long and therefore, needs a little more premium to balance the scale.
Give 3 statements about HMOs (Health Maintenance Organization)
HMOs stress preventive care. HMOs rarely assess deductibles. HMOs provide coverage for routine doctor visits and hospital care
If all else is equal, what characteristics does a participating policy have as compared to a non-par policy?
Higher premiums
Willis and his wife die in the same accident under the simultaneous death act. His wife is primary beneficiary and his children contingent beneficiaries. Who will the money go to?
His children...No one living on the primary line (Willis died last). The children are the contingent beneficiaries (secondary line). There you go. It's as simple as that.
The estimation of life insurance needed as a dollar valuation by discounting net future earnings at a reasonable rate of interest is known as:
Human life value approach...This question makes it sound a bit complicated, but it is just saying that we will determine the "human Life Value" of how earnings dollars need to be replaced if a death should occur.
All of the following are annuity benefit factors:
I. Age of annuitant II. Amount of proceeds III. Interest rate
An association must:
I. Be a natural group II. Have been in existence for 2 yrs
Which deductible(s) is/are included in supplemental major medical?
I. CORRIDOR II. INTEGRATED
Which retirement plans are deemed qualified?
I. Defined contribution plans II. Defined benefit plans
Which requirements apply to a defined benefit pension plan?
I. Definite determinable benefits II. Systematic payment of benefits III. Primarily retirement benefits
Florida's replacement rule applies to which of the following situations in which new life insurance is purchased?
I. Existing insurance is lapsed, forfeited, surrendered II. Existing insurance is converted using the non-forfeiture options of either paid-up extended term III. Cash values subjected to extensive borrowing IV. The policy is continued at a lower face amount
What must be described in the notice sent by a dually licensed agent to the policyholder if the purchase of securities will occur?
I. How insurance will be effected II. Why it's advisable III. Policies affected IV. Companies involved
Approaches used in determining the amount of insurance needed by a family include: I. Determine the dollar amount that can be afforded
I. Human life value II. Needs approach
Who regulates variable life insurance?
I. Insurance department II. S.E.C
Name three facts about the Fair Credit Reporting Act except:
I. Insurers must identify the source of information only II. Enacted in 1970 III. It is a federal law
Other uses of life insurance can include?
I. Investment II. Charitable contributions III. Provide gifts to minors IV. Investment management
A Universal Life Insurance policy has all the following features:
I. It is considered a form of Permanent Life Insurance. II. Contributions (premiums) may be increased or decreased by the policy payor. III. The face amount may be increased (subject to evidence of insurability), or decreased (subject to the I.R.S. corridor).
The benefit amount an annuitant receives each month at retirement is determined by:
I. Number of annuity units II. Value of annuity units
The benefit amount an annuitant receives from a variable annuity is determined by:
I. Number of annuity units II. Value of annuity units
The policyowner has only a limited period of time after discontinuing premiums in which to reinstate a lapsed policy. Other requirements that may be requested are:
I. Pay all back premiums II. Pay interest on past-due premium III. Prove insurability IV. Pay any outstanding loans back
Group credit life programs include:
I. Premium paid by borrower II. Limit on amount of insurance per borrower
What are some Defined Contribution plans?
I. Profit sharing plans II. Money purchase plans III. Stock bonus plans
A divorced spouse and her minor children have what rights under a group policy?
I. Spouse has 31 days to convert II. Minor children can convert policies at age 19 or if they are in school full time, as late as 23
The SEC permits life insurance companies to sell group variable annuity contracts based on separate accounts without registration as securities, when:
I. There are at least 25 employees II. No employee contributions III. Resulted from Administrative Action in 1963/1964
Which employees would likely be excluded from group term life insurance?
I. Those with less than 3-months service II. Those who work fewer than 20 hours a week III. Those who work fewer than 4 months per year In other words those who only work part time or seasonal
In which cases would the purchase of new life insurance be considered replacement?
I. When existing life insurance is surrendered II. When existing life insurance is reduced in face amount III. When existing life insurance is continued as extended term
A difference between life & health policies is:
I. life is a valued contract, health policies can be indemnity contracts II. life is a valued contract, health policies can be reimbursment contracts
Which of the following is provided by the payor (applicant) waiver of premium rider on a policy with a minor child as the insured?
If the premium payor dies, premiums are waived until the insured child reaches age 25.
How soon are employee's contributions to a retirement plan available to employee?
Immediately
If an agent accepts a premium for a lapsed disability policy, coverage for ACCIDENTS becomes effective in how many days after the acceptance of the premium?
Immediately
An employee's contributions into a qualified retirement will be vested at what point?
Immediately...This is almost a trick question. The answer is based on the fact that an employee's contributions always belong to the employee. There is no vesting going on with the employee's part. It's the employer who "vests" their contribution for the purpose of keeping the employee long term. However, this is a real question... and the answer is "immediately."
Which category of authority is the one which gives the agent the right to operate in a business manner doing the things typical of any business?
Implied
Insurable interest must exist at what time?
In life insurance, ONLY at the time of application
A split dollar insurance plan pertains to:
Individual life insurance...It is an individually purchased life insurance product which is paid for by the company and by the employee at the same time. The employer pays for the cash value portion and the employee pays for the cost of the term part of the insurance... the mortality charges. Split dollar is a method rather than a reason for buying life insurance.
Life insurance that is characterized by comparatively small issue amounts, and frequent premium payments is called:
Industrial insurance
Who regulates variable life insurance?
Insurance Dept. & SEC... Two agencies, the State of Florida regulates the insurance aspects, and the SEC regulates the securities aspects of the separate account.
Sales personnel selling whole life are regulated as:
Insurance agents...We are agents. That is not the same as "salesperson".... there is added responsibility to an agent as per the agent's authority: expressed, implied, and apparent.
"Subject to the provisions on the following pages of this contract, the insurance company will pay the death benefit to the named beneficiary. The death benefit will be paid on receipt of due proof of death of the insured and surrender of this policy." The provision quoted above is an example of:
Insuring clause...A good example. What the company is going to do for the client.
Which is found on the front page of all insurance policies?
Insuring clause...this is the clause where the company states what they are going to do and the particulars, when there is a claim.
The incontestable clause is two years from what point in time?
Issue date...Right. When the policy is issued, the 2 year contestability starts. At the end of that time, it moves into the "incontestability" period. Watch out! The state exam will be tricky on this one. If they say, "when does the incontestability clause begin." One of their answers may be 2 years from the inception of the policy. That isn't correct. It is actually 2 years and one day from the inception of the policy!!! Choose 2 years and one day.
The purpose of an annuity is the systematic distribution of an estate. The manner of distribution is selected by the owner.
It may or may not involve "life expectancy" calculations The annuity period may also be described as the benefit period
Which of the following statements about the reinstatement provision is true?
It requires the policyowner to pay, with interest, all premiums that are in arrears in order for the policy to be reinstated...Yes, it gives the policy owner a chance to restart the policy.
Mr. Finklestein has an accident and goes on disability income. After 9 months, he goes back to work. After 3 more months, he finds he returned to work too soon and must go back on disability. How will the company handle this claim?
It will be considered a continuation of the same disability
Who regulates the separate account in a Variable Annuity?
It's the S.E.C.
In what respect do limited pay life policies differ from straight whole life policies?
Limited pay life policies have a shorter premium-paying period
Which is considered a reimbursement contract?
MEDICAL EXPENSE
Which of the following might not be protected under the incontestability clause? Concealment, Fraud, Misstatement of age, Material misstatement
MISSTATEMENT OF AGE (This is not protected it is adjusted)
Drug addiction is an example of?
Moral hazard...Drug addiction is a legality issue and that makes it a moral hazard. Laws and rules.
An insured, Mr. Ale names his wife, Mrs. Ale as the primary beneficiary on a $100,000 whole life policy with a common disaster provision. Their son Hale is the contingent beneficiary. The common disaster provision prescribes that the primary beneficiary must live 14 days longer than the insured to receive benefits. Mr. and Mrs. Ale are involved in a serious private airplane accident. Mr. Ale is killed immediately. Mrs. Ale lives for 19 days before she dies. The correct statement:
Mrs. Ale receives the proceeds of the policy which in turn are paid to her estate upon her death.
This association works for the best interest of all policyowners and for ways in broadening the opportunity and advancement of the individual agent:
National Association of Insurance and Financial Advisors - Florida (NAIFA)
Taking all the funds available to a family and planning for their financial obligations is an example of:
Needs approach
Which feature in a life insurance policy allows an insured to stop paying premiums and take a paid-up policy with a face amount less than that of the original policy?
Non forfeiture option
What is the plan called if the employer pays the whole premium on a group policy?
Non-contributory
In Florida, what is the grace period for a life contract?
One month, but not less than 30 days
When could a war clause exclusion be enforced in a policy?
Only during wartime
Which would not be covered under business overhead expense insurance?
Owners salary
Which of the following will pay the policyowner an amount that does not exceed the guaranteed cash value? Policy loan, Automatic premium loan, Entire Contract, Dividend option
POLICY LOAN
What plan has a prearranged (discounted) cost to the insured?
PPO
Under a variable annuity policy, a paid-up deferred variable annuity will be issued when the:
PREMIUM PAYOUT ARE DISCONTINUED
In order to maximize policy death benefits for a beneficiary which dividend option should be selected?
Paid-up additions...Yes. Either this, or one-year term
What part of the application provides medical information?
Part II of the application
Mutual companies usually sell:
Participating policies...The reason is that this is the mechanism that allows a mutual company to lower the cost to the policyholder. Remember, that's the goal of a mutual company. Par (participating) policies make that work.
If the premiums on a child's policy are waived after the death or disability of the policy owner. The policy must have which of the following features?
Payor provision...That's it. The payor is the person who is the owner of the child's policy and is the one paying the premiums.
During the annuity period, the interest rates rise. What happens to the payout on a fixed annuity?
Payout stays the same for life
Which policy not usually offered as a dividend option?
Policy loan
Before replacing insurance, an agent must give a copy of a comparison and summary statement to the policyowner upon the request of:
Policyholder...Correct. Upon the request of the policyholder. This is a form that has two boxes on it.... YES and NO. If the policy owner indicates YES, that's when this requirement applies.
A dually licensed agent, who knows an existing insurance policy will lapse, and based on his recommendation, will be invested in a security, must notify who in 15-days?
Policyowner
Name a feature makes universal life different from whole life?
Premium payment schedule...Universal life is VERY flexible. Whole life is set on a specific premium payment for the full time of the premium schedule. Rigid.
Name one factor that makes universal life different from other whole life insurance?
Premium schedules...flexible, flexible, flexible. The premium, the face value, withdrawals, the way it functions.
The MIB's main purpose is:
Prevent misrepresentation and fraud
Which is the most correct about a GA verses PPGA's?
Recruits and trains vs. sells...this is what they both do. The GA recruits, trains and supervises, and the PPGA produces business personally.
An old man stops payment on his policy, but wants coverage for the remainder of his life. Which would provide this?
Reduced paid up...means it covers for the remainder of a lifetime, but at a reduced face value, and without any further payments of premium.
Which of the following is a Nonforfeiture Option that provides continuing cash value buildup?
Reduced paid-Up...The cash value will continue to grow (build up) even though the policyholder is not contributing any more money to it.
Arthur Murray owns a 30-Pay Life policy that he purchased at the age of 30. The cash value will equal the face amount of the policy when he reaches the age of:
Remember 100. Don't ask anyone in your office about this. The policies endow at 100. I'm telling you that. It's good for the exam.
A chef receiving Disability Income is unable to return to work full time but continues his occupation on a part-time basis. Which clause would allow the chef to continue to receive benefits long-term?
Residual Disability Benefit clause
Under what rule are endowment policies taxable after 60 days of maturation date?
Rule of constructive receipt...It means that the owner of the endowment policy has 60 days from the date the contract matures, to make arrangements for a payout (such as an annuity). If that isn't done, the IRS will determine that the owner "received" it... "THE RULE OF CONSTRUCTIVE RECEIPT," and any and all taxes are due immediately on an ordinary income basis.
Who regulates variable annuities?
SEC and the state insurance department...SEC and the State of Florida. Both because the SEC regulates the investment portion and the state regulates the "insurance" part of the contract.
Henri is self-employed. He decides to start a retirement plan, which plan will allow him to save the most with tax deferred treatment?
SEP...because Henri's SEP is the best of those shown for a small self employed business.
In a variable annuity who regulates the separate account?
Securities and Exchange Commission. They said so in 1956. The Supreme Court of the US agreed in 1959.
What is sliding?
Selling a policy by stating that it is required by state law
Health Insurance Coverage Continuation Act
Setting requirements for insurers selling plans to employers with under 20 employees
A life insurance applicant chooses the length of the premium-paying period when selecting the type of policy that should best meet his objectives. Which type of policy has the highest initial premium and shortest pay period?
Single premium life policy...Pay it once for a lifetime. This has the highest initial premium, but from a total out-of-pocket dollar standpoint, this one is the least expensive.
Which clause protects proceeds from creditors of the beneficiary?
Spendthrift Trust Clause...This clause protects the beneficiary from him/herself.
Which policy provides the greatest amount of death protection for an insured's periodic premium dollar as well as some cash accumulation?
Straight Whole Life
Which policy below, if issued at age 40, has premiums payable for 60 years, insurance protection for 60 years, and endows at age 100?
Straight whole life policy... Correct. Right. Payable for 60, insurance for 60, endows in 60 ... remember, the insured was 40 when the policy was purchased.
What type of policy has premiums paid to age 100, and upon age 100 pays the face amount as an endowment?
Straight whole life...Pay 'til 100, coverage 'til 100, and at the point it is fully endowed (age 100) the policy pays the face value. Don't be confused by the word endowment as in Endowment Policies.
A single premium deferred annuity is NOT a QUALIFIED plan (unless it is specifically setup in one), and therefore, it does not have a federal income tax deduction.
TRUE
All of the following retirement plans automatically qualify for a federal income tax deduction except: A Corporate pension plans B 403(b) C SEP
TRUE
The applicant has the right to obtain disclosure of which reporting agency created the consumer report.
TRUE
The code of ethics of the National Association of Insurance and Financial Advisors is incorporated into Florida Law.
TRUE
The disadvantage of naming an estate as the beneficiary is that the proceeds will be included in the insured's gross estate.
TRUE
Twisting is defined as the practice by which policy values from an existing life insurance policy are used to purchase another policy from a different company where the change is not beneficial for the policy holder.
TRUE
Premiums for group term life insurance paid by an employer on behalf of his employees are:
Tax deductible under certain conditions
How is the divisible surplus received by a recipient?
Tax free because the funds are effectively an overpayment of premium...
When the initial premium accompanies the application, who makes the offer?
The policy owner/applicant. The insured is the next best answer.
When does the 14-day free look begin?
Time the policy is physically delivered
To whom must a dually licensed agent send a notice if the purchase of securities will occur, and the policyholder will be replacing his/her existing policy?
To the policyholder. Only to the policyholder.
What factors determine the amount an annuitant receives at retirement?
Total capital Interest rate Payout option selected
All of the following are benefits provided under Part A of Medicare:
inpatient hospital care. skilled nursing facility care. hospice care
Which feature of an insurance contract states that only one party has any further obligation?
Unilateral...Unilaterial is one of the words which describes the unusual relationships in life insurance contracts. The company is obligated until the end of the period, which in the case of permanent insurance, it is a lifetime. The policyowner is only obligated on a day by day basis. Only one party is making an enforceable promise and that party is the insurance company. This is why a 15 year old can buy a policy without an adult co-signing. The 15 year old is not bound to continue the payments, but the company must continue the coverage until the contract is cancelled by the client, in the case of a permanent policy, or until the end of the term agreement with a term policy.
Market value of common stock is set by:
What the buyer is willing to pay and what the seller is willing to accept...This may sound like a simple explanation, but it is exactly correct.
When is the greatest need for income?
When the children are growing up.
When are disability income benefits received as nontaxable income to the recipient?
When the employee has paid the premium
Adjustable life policies are constructed using which of the following as their base policy?
Whole life
Are there limitations placed on Universal Life to get favorable tax treatment?
Yes, a percent of all premiums must purchase death benefits.
A deferred annuity does not pay any benefits until:
a delay of longer than 1 year occurs.
Social Security Dependant survivor benefits are:
a form of government life insurance...It is insurance, and the government is doing it.
A insurance policy with XYZ Insurance states that the insurer will not refuse to renew the policy and furthermore, the insurer may not cancel the policy. However, the insurer may change the premium by classes of insureds. This policy is:
a guaranteed renewable policy
Under some policies, an injury that does not qualify the insured for monthly disability income benefits may make the insured eligible for:
a non-disabling benefit.
Which of the following will pay the policyowner an amount that does not exceed the guaranteed cash value?
a policy loan may be taken out against the cash value of the policy.
Florida law provides that at least once each year the insurer must provide the annuity contract owner with:
a report that states the number of units and dollar value of the units to date.
Combining the principles of waiver & estoppel results in:
a voluntary relinquishment of a known right
Combining the principles of waiver & estoppel results in:
a voluntary relinquishment of a known right.
An action an agent cannot be fined for is:
acting as a fiduciary...This is a catchy way to try to get you with a term you may not have committed to memory yet. A fiduciary is a person who holds a position of special trust and confidence. Now that doesn't sound like something for which you could be fined, does it?
Variable annuities guarantee ___________.
against living too long...This is right and is also true for fixed annuities. An annuitant can't outlive their annuity payment. It keeps paying until the annuitant's death.
The concept that the values given by two parties is unequal refers to:
aleatory means that is it never fair.... one of the parties receives more benefit than what is equal.
Grouping small businesses together to obtain insurance as one large group is characteristic of which:
an M.E.T. (multiple employer trust)
Signing over all rights of ownership in a policy by the owner is:
an absolute assignment...Absolute. This is a complete transferring of ownership to the new owner. It is not necessary to get the approval of the insurance company to do this.
Before payout phase begins, accumulation units must be converted to:
annuity units.
Before Variable Annuity benefits can be paid out, accumulation units must be converted into:
annuity units. Then the amount to be paid each month is determined by the number of annuity units.
A standard risk submits an application requiring a medical exam and receives a conditional receipt for his premium. This conditional coverage is first effective:
as of the completion of the required medical examination.
If a person indicates on a life insurance questionnaire that he is a private pilot, the company will:
ask for an aviation questionnaire to be completed.
Dollar cost averaging is:
averaging the cost of the units purchased over a period of accumulation.
A policy that is sold in proportioned units to cover an insured, spouse and children is called a:
family plan...the key to this is the fact that there are more people than one in the policy, and the second thing is that it is in units.
When an applicant applies for insurance by completing an application and paying the initial premium, this constitutes:
consideration and an offer to buy
If an agent accepts a premium for a lapsed disability policy, coverage for accidents becomes effective in how many days after the acceptance of the premium?
coverage is immediate
If an agent converts premium he collects for his personal use, he can be charged with:
embezzlement is the converting of company funds to his or her own use.
An agent who converts premium he collects for his personal use is guilty of ___________.
embezzlement... taking money which doesn't belong to the agent.
How do HMOs emphasize preventive care?
encouraging routine physical exams & diagnostic screening
Under the uniform provisions law, which provisions are mandatory for a health policy?
entire contract physical exam & autopsy time limit on certain defenses
Under Social Security, a covered worker's P.I.A. is:
equal to the full retirement benefit at 65.
A variable annuity separate account will be invested in:
equity investments
Calculating the tax-free portion of each annuity payment utilizes the:
exclusion ratio
Participating Variable Annuities provide for:
expense savings which may be credited to individual VA accounts.
In Medicare supplement policies, the free look provision is:
extended to 30 days
Annuities are used primarily as a protection against:
the risk of outliving one's income.
The incontestable clause permits insurers to contest a death claim:
for material misrepresentations if 2 years or less
The incontestable clause permits insurers to contest a death claim:
for material misrepresentations if 2 years or less.
What is not contained in an outline of coverage?
future value of policy
Premiums for industrial health policies are:
high because premiums are paid more frequently and company has less money to invest.
Under individual and group health insurance sold in Florida, coverage for a newborn child of the insured begins how soon after birth?
immediately
The termination clause in a group life plan states that the employee:
is guaranteed at least 31 days of protection.
remember this sequence of numbers: 20 15 90 45 60...say it over and over so you can remember the string of numbers in the right order. Note one other thing: every time it is your turn, the number ends in 0, and every time it is the company's turn, their number ends in 5. The state exam will not ask the questions in the right order and it is very difficult to remember which is which unless you memorize this string.
it is the way things happen in claims. If you have an illness.... ...20 days for YOU to tell the company you are going to have a claim ...15 days for THEM to send you the forms to fill in and attach your receipts ...90 days for YOU to fill out the forms, attach the receipts, and send it to the company ...45 days in which the company has to pay you ...60 days YOU have to wait before you can sue the company if they don't pay.
All types of life insurance provide a suitable base for a retirement plan except
level term
Zeke has decided he needs permanent life insurance but doesn't want to pay premiums for a long period of years. What kind of insurance would be a correct choice?
limited pay whole life has shortened payment periods: to 65, or 20 year, or single premium, etc.
An immediate annuity is purchased:
lump sum
An immediate annuity is purchased:
lump sum... purchased at one time. Then it is "immediately" turned into the payout side which is called the annuity side.
Name 3 categories of health care policies:
medical expense accidental death disability income
The type of hazard that arises from an attitude or state of mind that causes indifference to loss is called:
morale...attitude is morale. Moral is legal areas. Physical is health and other visible attributes.
All electricians in Orlando are eligible for group life. This type of group is called a(an):
multiple employer trust...This type of group is a collection of employers. Its name is a "multiple employer trust." Something to notice here is that they aren't getting a group together to buy insurance (as in ficticious group). They were already qualified as individual employers and now are getting together to get a better price.
To be an association allowed to purchase insurance in Florida, which factors must apply?
must be a natural group & been in existence at least 2 years
In Florida, how many people are needed to qualify for group insurance?
no minimum
Arthur has his wife as a primary beneficiary, his children as secondary and his church as tertiary. If neither his wife nor his children survive him, who will get his insurance money when he dies?
no one on the first two lines are still living. Therefore, the proceeds move to the tertiary line: his church.
Individual health policies are usually written
nonparticipating
Industrial life insurance permits conversion:
of two or more policies into a single ordinary policy...Yes, that is a requirement of industrial policies.... if the policies total more than $3000 face value, the industrial insurance company is required to convert them into one ordinary life policy if requested by the policy holder.
If the insured overstated his age and the error is discovered after the insured's death, the insurance company will:
pay an amount equivalent to that which the premium would have purchased at the correct age.
Under Workers Compensation, a disability that is a permanent physical impairment leaving the individual incapable of performing the previous regular occupation but capable of performing some other type of work, is a:
permanent residual disability
The primary purpose of the Coordination of Benefits provision found in a group Medical Expense contract is to:
prevent the claimant from profiting from an injury or sickness.
The purpose of the grace period is to:
protect the policy holder against unintentional lapses...The policyowner is given the chance to get back in the good "graces" with the insurance company.
When a plan meets requirements for the federal government in order to receive favorable tax treatment it is called a _________ plan.
qualified
If a proposed insured has a hazardous occupation, the insurance company would probably:
rate the insured and charge an extra premium.
A 30 year limited pay life policy:
requires 30 yrs to complete payment & endows at age 100.
Millicent wants to name her husband as the beneficiary of her life policy; however, she wishes to retain all of the rights of ownership. Millicent should have her husband named as:
revocable beneficiary
Which of the following best describes self insurance?
risk retention
A life insurance agent is often referred to as a field underwriter primarily because he/she is generally the one who:
sees the applicant
A company that automatically gives coverage upon receipt of an application, the premium, and completed medical exam has given:
temporary insurance agreement...This is correct because of the word "automatically" and because there was no statement that it was conditioned upon the applicant proving insurable.
The Fair Credit Reporting Act provides:
that the applicant for insurance be informed that a consumer report may be requested.
Which law requires an insurance company to notify an applicant in writing that an investigative consumer report may be made on him?
the Fair Credit Reporting Act of 1970 which is for the protection and privacy of the applicant/insured.
This report reflects an applicant's mode of living, and exposure to abnormal hazards.
the Inspection Report
he separate account of a VA company will be regulated by:
the Securities and Exchange Commission
The benefit paying period of an annuity is called:
the annuity period.
Protection against the unintentional lapse of a policy may be afforded by:
the automatic premium loan provision
A policy owner commits suicide 2 1/2 years after the policy is issued. What will the company pay?
the company will pay THE FACE AMOUNT because the owner had the policy longer than the "1 or 2 years" stipulated by the suicide clause.
Under the uniform simultaneous death act of Florida, when there is no proof as to who died first, it assumes:
the insured died last....Yes... Always. If George and Martha died and it can't be determined who died last, George died last on his policy, and Martha died last on her policy.
On an insured's policy, the spouse is the primary beneficiary and the children are named as contingent beneficiaries. If the insured and spouse are killed simultaneously in an accident, proceeds will be paid to:
the insured's children...Yes.... because of the Simultaneous Death Act, the insured died last, and the proceeds go to the secondary, or contingent beneficiaries.
Washington takes a skiing trip and breaks a leg. Upon returning home, he purchases a major medical policy and files a claim which the company disapproves. The reason they decline the claim is:
the insuring clause... the insuring clause tells what the company is going to do and WHEN.
The human life value approach states:
the value is determined by discounting estimated future income...This is right... and it's a tough question. The human life value approach is basically a simple one. The needs approach is the other one which covers the many aspects of potential need for insurance. Human life value uses the current situation in setting values and therefore, "discounts" (both in numerical value and in attention to the need) the future income requirements.
Dividends are not taxable as income because
they are a return of part of the premium paid
Dividends are not taxable as income because:
they are a return of part of the premium paid
An agent replacing an existing policy from another company with one from his own company which is of no financial advantage to the insured is guilty of:
twisting...this is the definition of twisting. Policies from two different companies. Churning is when the two policies are from the same company.