Life Insurance 1-9
Which of the following statements about noncontributory employee group life insurance is False?
A minimum number of employees is required to participate
Which of the following annuities pays benefits based on units rather than specific dollar amount?
A variable annuity
which of these is an element a variable life policy? A. A fixed, level premium B. insurer assumes the investment risk C. no investment risk to the policy owner D. rate of returns are guaranteed
A. A fixed, level premium
Under federal tax laws, what is the tax treatment for an employer providing $50,000 of a contributory group Term Life plan to all its eligible employees?
Portion of the premiums paid for by the employer may be a tax deduction
A policy owner is able to choose the frequency of premium payments through what policy feature?
Premium Mode
What determines the full amount of social security retirement benefits a qualified individual is entitled to receive?
Primary Insurance Amount (PIA)
what is the consideration given by an insurer in the consideration clause of a life policy?
Promise to pay a death benefit to a named beneficiary
which of these provisions require proof of insurability after a policy has lapsed?
Reinstatement
A life insurance arrangement which circumvents insurable interest statutes is called:
Investor-Originated Life Insurance
Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements?
Legal Purpose (Insurable Interest)
which of these are NOT an example of a nonforfeiture option?
Life Income
which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?
Life Income
The accelerated death benefit provision in a life insurance policy is also known as a(n):
Living Benefit
and insured's ability to perform two or more activities of daily living may trigger which type of policy rider?
Long term care
Which of these is an element of a single premium annuity?
Lump-sum payment
A policy owner is allowed to pay premiums more than once a year under which provision?
Mode of Premium
When in employee is terminated, which statement about a group term life and conversion is true?
Pause the proceeds will be paid if the employee dies during the conversion period.
M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?
Pay face amount minus the past due premium
Which of these statements concerning an individual street life annuity is accurate?
Payments are made to annuitant for life
Who elects the governing body of a mutual insurance company?
Policyholders
M purchased an Accidental Death and Dismemberment (AD&D) policy and named his son as beneficiary. M has the right to change the beneficiary designation at anytime. What type of beneficiary is his son?
Revocable
what type of life insurance are credit policies issued as?
Term
what is the underlying concept regarding level premiums?
The early years are charged more than what is needed
A noncontributory group term life plan is characterized by:
The entire cost of the plan is paid by the employer
T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive?
$0
what percent of personal life insurance premiums is usually deductible for federal income tax purposes?
0%
A 15-year mortgage is best protected by what kind of life policy?
15-year decreasing term
what year was the McCarran-Ferguson Act enacted?
1945
Q is severely injured in an automobile accident and becomes totally disabled. How many months must Q be disabled before being able to apply for Social Security disability benefits?
5 months
T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay?
50,000
which of these describe a participating life insurance policy? A. policy owners are entitled to receive dividends B. policy owners pay assessments for company losses C. stock companies allow their policy owners to share in any company earnings D. policy owners are not entitled to vote for members of the Board of Directors
A. Policy owners are entitled to receive dividends
The common disaster clause provides that if both the insured and the sole named beneficiary were to die in a common accident, which of the following is true? A. this clause provides the payment of proceeds to the insured's estate B. this clause provides the payment of proceeds to the beneficiary's estate C. The estate taxes in the insured's estate may be reduced D. The estate taxes in the beneficiary's estate may be reduced
A. This clause provides the payment of proceeds to the insured's estate
all of the following are considered to be typical characteristics describing the nature of an insurance contract, except: A. bilateral B. unilateral C. aleatory D. adhesion
A. bilateral
which statement is correct regarding the premium payment schedule for whole life policies? A. Premiums are payable throughout the insured's life/coverage lasts until death of the insured B. premiums are payable for a set period/coverage expires at that point C. premiums are payable until age 65/coverage last a lifetime D. Single premium is paid at time of application/coverage lasts until retirement
A. premiums are payable throughout the insured's lifetime/coverage lasts until death of the insured
The Consideration clause in a life insurance contract contains what pertinent information?
Amount of premium payments and when they are due
An annuity promises that, if the annuitant dies before receiving payments equal to the correct value, the payments will be continued to a beneficiary until an amount equal to the contract value has been paid. This type of annuity is called
An installment Refund annuity
J is 35-years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value? A. Life paid-up at age 70 B. 20-pay life C. increasing term to age 65 D. straight life
B. 20-pay Life
All of these insurance products require an agent to have proper FINRA securities registration in order to sell them EXCEPT for: A. variable life B. modified whole life C. universal variable life D. variable annuity
B. Modified Whole Life
which statement regarding the change of beneficiary provision is true? A. The beneficiary can only be changed with the consent of the insurer B. The policy owner can change the beneficiary C. The insured can change the beneficiary D. A beneficiary change is subject to underwriting procedures
B. The policy owner can change the beneficiary
which of these statements describe a modified endowment contract (MEC)? A. Falls below the minimum amount of premium that can be paid into a policy and still have it recognizes the life insurance contract B. exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract C. The seven pay test is used to determine the minimum death benefit of the policy D. The seven pay test is used to determine the maximum death benefit of the policy
B. exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract
What is considered me a characteristic of an immediate annuity?
Benefit payments start within one payment period of purchase
P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take? A. beneficiary will be denied the claim B. beneficiary will be denied the claim and refunded all paid premiums C. beneficiary will be paid the death benefit D. beneficiary will be paid a partial death benefit
C. Beneficiary will be paid the Death Benefit
which of these statements is INCORRECT regarding the federal income tax treatment of life insurance? A. premiums are normally not tax-deductible B. cash dividends are normally not taxed C. entire cash surrender value is taxable D. proceeds are received tax free if there is a named beneficiary
C. Entire cash surrender value is taxable
A long-term care rider in a life insurance policy pays a daily benefit in event of which of the following? A. critical illness B. terminal illness C. inability to be insured to perform more than two activities of daily living (ADL's) D. inability of the insured to maintain insurance premiums due to unemployment
C. Inability of the insured to perform more than 2 Activities of Daily Living (ADL's)
K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true? A. proceeds will be paid to P's estate B. proceeds will be divided equally between K's and P's estate C. proceeds will be payable to K's estate if P dies within a specified time D. The courts will decide who will receive the death benefit
C. Proceeds will be paid to K's estate if P dies within a specified time
Which of these require an offer, acceptance, and consideration? A. warranty B. estoppel C. contract D. representation
C. contract
which of the following actions is NOT possible with a universal life policy? A. policy's cash value may be used to pay premiums B. premium payments maybe made at unscheduled times C. premiums may be applied as a credit against income tax D. Face amount may be adjusted
C. premiums may be applied as a credit against income tax
which of these is not a type of agent authority? A. Express B. implied C. principal D. apparent
C. principal
which of the following policies is characterized by flexible premium and definite fit and allows the policy owner control of the investment aspect of the plan? A. variable life B. universal life C. variable universal life D. adjustable life
C. variable universal life
Which rider provides coverage for a child under a parent's life insurance policy?
Child term rider
What group term life feature permits in individual to depart from the group and continue to be covered without providing evidence of insurability?
Conversion
An employee of 20 years recently retired at 59 1/2. This employees group life contract can be:
Converted to an individual permanent policy at an individual rate
Which of these arrangements allows one to bypass insurable interest laws? A. concealment B. indemnity contract C. contract of adhesion D. investor-originated life insurance
D. investor-originated life insurance
The Accidental Death and Dismemberment (AD&D) provision in a life insurance policy would pay additional benefit if the insured: A. dies of natural causes B. becomes critically ill C. becomes chronically ill D. is blinded in an accident
D. is blinded in an accident
which of the following statements is correct about the period in which a term policy can be converted? A. it is the same in all contracts B. it is set by state regulation C. it can be changed by the insured D. it varies according to the contracts
D. it varies according to the contracts
G purchased a 50,000 single premium, straight life annuity two years ago. G has been receiving monthly payments from the annuity. When G dies, the insurer:
Does not have to make any further payments
What provision in a life insurance policy states that the application is considered part of the contract?
Entire Contract provision
E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Although E was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E's life insurance policy be directed to?
F
An insurance applicant MUST be informed of an investigation regarding his/her reputation and character according to the:
Fair Credit Reporting Act
P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year period. What type of policy should P purchase?
Family Maintenance Policy
S, while in the process of converting her group life insurance to an individual policy, dies. What happens to the claim her beneficiary submits?
Full benefits are payable under the Master contract
and insured is past due on his life insurance premium, but is still within the grace period. What will the beneficiary receive if the insured dies during this grace period?
Full face amount minus any past due premiums
When must insurable interest exist for a life insurance contract to be valid?
Inception of the contract
How does an indexed annuity differ from a fixed annuity?
Indexed annuity owners receive credited interest tied to the fluctuations of the linked index
Which of these actions should a producer take when submitting an insurance application to an insurer?
Inform insurer of relevant information not included on the application
If the insured and primary beneficiary are both killed in the same accident and it cannot be determined who died first, where are the death proceeds to be directed under the Uniform Simultaneous Death Act?
Insured's contingent beneficiary
An individual who purchases a life annuity is it given protection against?
The risk of living longer than expected
Which of the following is a characteristic of a verbal annuity?
Underlying equity investments
What type of annuity has a cash value that is based upon the performance of his underlying investment funds?
Variable
Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?
Variable Universal Life
When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?
Void the policy only if it is discovered during the Contestable period and proven to be material
A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?
Waiver of Premium
at what point does an informal contract become binding?
When one party makes an offer and the other party accepts that offer
Which provision is not a requirement in a group life policy?
accidental
B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of
additional Whole Life coverage at specified times
which of the following dividend options results in taxable income to the policy owner? A. paid up additions B. cash C. accumulation at interest D. reduced premium
c. accumulation of interest
A person who is insured within a group contract will be given a
certificate
The incontestable clause allows an insurer to:
contest a claim during the contestable period
K has a life insurance policy where her husband is beneficiary and her daughter is contingent beneficiary. Under the Common Disaster clause, if K and her husband are both killed in an automobile accident, where would the death proceeds be directed?
daughter
A family income policy is a combination of whole life and
decreasing term insurance
Under a trustee group life policy, who would be eligible for a certificate of coverage?
employee
When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n):
exclusion
Taking receipt of premiums and holding them for the insurance company is an example of
fiduciary responsibility
variable life products require a producer to
hold a Life Insurance license and a Securities license
If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?
insured
A policy owner's rights are limited under which beneficiary designation?
irrevocable
What kind of premium does a Whole Life policy have?
level
K buys a policy where the premium stays fixed for the first five years. The premium then increases in year six and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?
modified whole life
Who benefits in investor-originated life insurance (IOLI) when the insured dies?
policy owner
Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called:
representations
The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called:
reserves
what type of life insurance gives the greatest amount of coverage for a limited period of time?
term life
C is trying to determine whether to convert her convertible term life policy to whole life insurance using her original age or attained age. What factor would affect her decision the most?
the cost
The consideration clause of an insurance contract includes:
the schedule and amount of premium payments
All of these are considered to be a benefit under Social Security, except for:
unemployment
A(n) ______ Life policy offers the owner investment in products such as money-market funds, long-term bonds and equities.
variable
Life insurance immediately creates an estate upon the death of an insured. Which policy is characterized by guaranteed minimum death benefit?
variable life
The part of a life insurance policy guaranteed to be true is called a(n):
warranty
Which parts of a life insurance policy are guaranteed to be true?
warranty
A life insurance policy that provides a policy owner with cash value along with a level face amount is called:
whole life
