Life insurance
Identify the statement that is true about contributory group life insurance. a) The employer will make a cash contribution to the estate of a deceased employee b) The employer will contribute the full amount of the premium c) The employee will contribute to the premium payments d) None of the above
C
All of the following are examples of the dividend options available on a whole life insurance policy, except: a) One-year term option b) ~~~iication to r;educe premium , . . c) Paid-up additions d) Life income with period certain
D
A binding receipt issued on the sale of a life insurance policy becomes effective from the date the receipt is given--no matter what the insurability of the applicant. a) True b) False - Binding receipts do not apply to life insurance policies
A
Fran is comparing life insurance available through her employer and an independent life-only agent. Her employer provides automatic coverage and requires medical information than the life-only agent? a) , More b) Less C) Neither A nor 8, the medical information required would be the same
BD
29. If the owner of a life insurance policy elects to pay an annual premium, she will: a) Find her premiums the same as compared to all other payment methods b) Pay more as compared to paying premiums every 6 months c) Pay less as compared to paying premiums every 6 months d) Pay a reduced amount if she pays earlier in the year, rather than at the end of the term of coverage, as is customary
C
4. Which of th6 following cannot legally be used when determining premlum rates for life insurance? a) Gender b) Age c) Nationality d) All the above may not be used
C
1. Every licensee must indicate on which of the following documents his or her license number? a) Print advertisements b) Business cards c) Written price quotations d) All the above
D
28. ~ll of the following are used in determining life insurance rates, except: , a) Investment and interest return b) Insurance company expenses c) Mortality expenses d) Policy reserves
D
3. An agent makes a misleading comparison of a policy he is selling in order to convince a prospect to lapse an old insurance policy. What is this called? a) Intimidation b) Rebating c) Boycotting d) Twisting
D
A policy owner makes the last premium payment on his $250,000 non-par whole life policy today. The owner is 70 years of age. When will the cash value reach $250,000? a) About 13 years from now b) The cash value is $250,000 today C) Never, he didn't pay up to age 100 d) When he reaches the age of 100
D
According to the terms of the suicide clause found in a life insurance policy, if an insured commits suicide within six months after the policy is issued, what will the insurer do? a) Pay the full claim b) Pay nothing c) Pay a pro-rated amount of the premiums received d) Refund all the premiums paid
D
Harold, a variable annuity applicant, does not request the premium be invested in a stock or bond portfolio during the cancellation period. The policy is returned to the company within the cancellation period. What is Harold entitled to receive? a) The entire premium b) The value of the policy on the day it was cancelled c) The premium less the surrender charge d) The value of the policy on the day the policy was delivered
A
A type of contract, which is considered a savings instrument used for accumulating investment funds for the purpose of eventually receiving those through a systematic program of withdrawal is a/an: a) An annuity b) Term insurance policy c) Disability insurance policy d) All the above
A
An additional amount of premium used to pay for an accidental death benefit provision does not increase the cash value of the policy. a) True b) False
A
An irrevocable beneficiary has certain rights to policy proceeds not shared by revocable beneficiaries. For example, an irrevocable beneficiary must grant permission for the policyowner to borrow from the cash value. a) True b) False
A
Decreasing term insurance is frequently used to pay the unpaid balance of a mortgage upon death of the mortgage holder. a) True b) False
A
When applying for insurance, there is usually the owner of the contract, the insured and the applicant. They may be: 1. Three different individuals 2. The same person a) 1 only b) 2 only C) both 1 and 2 d) neither of the above
C
5. Generally, it is unfair to discriminate against any one class of individuals in the business of insurance. However, the code does permit the charging of a higher premium if such premiums can be supported by mortality tables segregated by sex (gender). a) True b) False
A
Which of the following is true regarding the government's social insurance program known as Social Security? a) The majority of workers in the U.S. must pay into the program b) The contributions paid in closely match the benefits received c) Participants sign a contractual agreement with the insurer d) Both A and B above are true
A
Which of the following supports the Medical Information Bureau? a) Insurance companies b) The Department of Insurance c) Insurance agents d) None of the above
A
Many insurance policies issued contain a common disaster provision. The provision is designed to protect: a) Insurers b) Contingent beneficiaries c) Both a and b d) Neither a nor b
B
If no other selection is made, which of the following settlement options becomes the default or automatic mode of settlement for the death benefit of a life insurance policy? a) Life income with period certain b) The purchase of an annuity c) Installment payments d) Lump sum in cash
D
Select the policy riders frequently found in life insurance polices: a) Accidental death and dismemberment b) Waiver of premium C) Cost of living d) All of the above
D
Survivorship life or second-to-die policies: 1. Are effectively used to cover the costs of estate taxes 2. Are issued in excess of $1 million in most cases 3. Reflect substantially lower premiums when compared to buying two'separate policies a) 1 only b) 2 only C) 3 only d) 1 and 2
D
The California Insurance Code contains very specific regulations regarding the abllity of a senior cltizen to return a life insurance policy or annuity. The regulation: 1. Applies to group plans and individually issued pollcies equally 2. Allows a senior citizen a minimum of 30 days to return a life or annuity contract to the insurer. They are entitled to a full refund of premium 3. Specifies a senior citizen as an individual who is at least 65 year of age as of the purchase date a) 1 and 2 b) 2and3 c) 1 only d) 2 only
D
When the public purchases annuities, they are attempting to address the risk of: a) Dying before the age reflectedon mortality tables b) . Getting too old to qualify for life insurance c) Having to pay any taxes on their savings d) Outliving the money they have saved for retirement
D
Which of the following is not an acceptable risk to the underwriting department of an insurance company? a) Sub-standard b) Preferred c) Standard d) All are acceptable risks
D
Why would a business use a key person life insurance policy? a) To provide the key employee's surviving family members with funds to live on after the death of the employee b) To help the employee's spouse supplement her Social Security benefits c) To better allow the employee qualify for a bank loan d) To protect the company from the financial consequences of the death of a Vice President
D
Choose the correct statement about the ten-day free look provision In a life Insurance policy: 1. A full refund of premium is required if the policy is returned within 10 days of delivery 2. The contract is in force during the 10 day period and any claims must be paid even though the insured returns the contract a) 1 only b) 2 only c) 1 and 2 d) neither of the above
A
In life insurance policies, naming beneficiaries is an important part of the application process. Choose from below the best description of a contingent beneficiary: a) One with the first right to receive proceeds if there is no suwiving primary beneficiary and the insured dies b) One with the right to proceeds only if the primary and secondary beneficiary die in a common disaster c) One with the right to proceeds if the insured dies d) All the above are false
A
One of the provisions commonly found in life insurance is the "misstatement of age" clause. If the age of the insured is in error but not discovered until much 'later, the insurance company will: a) Make an adjustment to the face amount to properly reflect the premiums that have been paid b) Send back all collected premiums to the insured and cancel the policy c) Send back all collected premiums to the insured, pay interest on that amount and cancel the policy d) Try to establish if there was intent to defraud. If not, the insurer will most likely not pursue legal actions
A
Oscar owns a whole life policy that he.has been paying into for many years. He would like to continue having life insurance, and can afford to make the premium payments, but needs about 30% of the cash value for a couple of years. What would be the best course of action for Oscar to take? a) Continue making the premium payments to keep the contract in force and borrow from cash value b) Since he must surrender the policy to get any money out he can do so, then buy another policy with the other 70% of the funds he received from the cash value c) Find another source of funds. He has no access to cash value until the age Of 100 d) Find anothw source of funds. Whole life policies do not build cash value
A
Select the incorrect statement from the choices below concerning insurance applications: a) Before the insurer can issue the policy, the beneficiary must acknowledge any changes by providing hislher original initial b) Applications become a part of the contract, when attached c) The statements made on the application are viewed as representations (statements made to the best of the applicant's knowiedge) d) The name of the jnsured must appear somewhere on the application
A
Settlement options provide a number of choices relating to how death benefits can be paid by the insurer. These choices: 1. Can be made by the policyowner at the tlme of submission of the application 2. Can be changed by the policyowner at any time before benefits are paid 3. Can be made by the beneficiary if, at the time of death of the insured, no option was establ~shed a) 1, 2 and 3 b) 1 and 2 c) 1 and 3 d) 1 only
A
The owner of a non-par whole life policy never misses a payment, never borrows from the policy's cash value, and finally reaches the age of 100. What cash value is this person entitled to in comparison to the face amount? a) 100% of the cash value which is now the same as the face amount b) None of the cash value, the person has not died c) About 50% of the cash value as of the date of the birthday d) None of the above
A
Which of the following is false about dividends paid from life insurance policies? A dividend is: a) Treated as a return of excess premium paid by the owner and is therefore taxable b) If interest is earned on dividends and paid to the policy owner, it is considered taxable c) Not guaranteed to be paid to the policyowner
A
Which of the following is false regarding the taxation of life insurance? . a) Annuity death benefits are totally exempt from taxation b) Businesses that buy group term life insurance for its employees can generally deduct the premiums because they are considered a business expense c) Individuals making premium payments on life insurance can not deduct those premiums d) None of the above are false
A
Which of the following is not a legal activity in this state? a) Participating in a plan to offer free insurance if a person buys some form of service b) Disregarding age in the determination of insurancerates c) Refusing to apply the practice of twisting in sales d) All the above are legal in the state of California
A
Which of these statements with regard to the tax treatment of life insurance is 1 true? a) Death benefits are generally exempt from taxation b) Individual policy premiums are tax deductible c) Policy premiums that provide benefits to employees are not tax deductible d) These are all true
A
lerry is using a new time management technique in his insurance sales presentation. In order to cut the amount of time he spends at each appointment he no longer answers questions when they are first asked. Instead he answers them only if they are asked twice. He feels this will allow him to get to his next meeting quicker. Most insurance professionals would consider this: a) An unethical practice b) A clever and ethical practice
A
7. Employees that have group - life policies covering them are required to be issued a/an ~! a) Estimate of employers premiums b) Certificate of insurance c) Master policy d) Monthly premium notification on a non-participating plan
B
A family life insurance policy that provides coverage for children may be converted to permanent insurance for the children, but evidence of insurability is required. a) True b) False,
B
All of the following are reasons for an individual to purchase personal life insurance, except: a) To have funds that can supplement Social Security at retirement b) To cover a buy/sell agreement c) For the creation of an immediate estate d) To have cash available for emergencies
B
Beth wants to purchase more life insurance through her current policy. She calls you, the agent, and asks your opinion. You know Beth has a guaranteed insurability rider on the policy. She can buy more insurance: a) Assuming she is still insurable on her life at specific ages b) Without the need to prove insurability on her life at specific ages c) On the life of her dependent children when they reach certain ages d) Without the need to prove insurability on her life at any time
B
Charles received a large inheritance from his uncle's estate. Because he can use the income, he buys an annuity with the full amount of his inheritance that will begin paying him monthly payments starting the following month. Charles has purchased a/an annuity? a) Flexible premium deferred b) Single premium immediate c) Annual premium deferred d) None of the above
B
Choose the best beneficiary designation for the following case: The children are to receive equal shares of the benefit. If any of the children die before the insured does, the insured wishes the remaining children receive the deceased child's share equally divided among them. a) Per stirpes b) Per capita c) Each named as primary beneficiary, equal shares d) None of the above
B
Frequently, juvenile life policies contain a payor rider. This rider states that in the event the payor of premiums is disabled or dies, and the juvenile has yet to reach a specific age: a) The insurance firm will lend (with interest) funds to make the premium payments b) The premiums will be paid by the insurer until the child reaches the age of 21 or 25 c) The deceased parent's estate wiil pay the premiums d) The insurer wiil completely waive all future premiums
B
From the examples below, choose the one that gives the best description of a reduced paid-up non-forfeiture option: a) The 40-year-old insured can no longer pay on her whole life poiicy. She takes the cash value from the plan and buys a paid-up policy for the same amount that lasts only 5% more years b) The insured decides to cease paying premiums on his $100,000 cash value policy. He uses the cash value to buy a paid-up policy of $40,000 face amount c) Pam can't afford the premiums on a 10-pay life policy that now has $50,000 in it. She contacts the insurer with her instructions and is paid the full $50,000 in cash d) None of the above describe the reduced paid-up option
B
From the following, identify that which constitutes the 'entire contract" in a life insurance policy. The policy: a) And any oral statements along with the application b) And a copy of the application when attached c) And a brochure on the insurer including code-approved financial information d) ' But not the application
B
Jennifer has reached a time in her life where she wishes to begin receiving payments from her tax-deferred annuity. Her agent has suggested she take the money by means of the "life income with 10 years certain" option. When she does, the insurer will make payments: a) For 120 months assuming she lives that long b) For at least 120 months or the remainder of her life c) Up to the date she dies, then payments will be made to her beneficiary d) For 120 months then payments will decrease and be paid to her for life
B
Juan has been named as an irrevocable beneficiary in a life insurance policy, Juan, therefore: a) Can pay premiums at any time and become the policy owner b) Has vested rights to the policy proceeds that, unless he gives consent, cannot be affected by the policy owner nor any creditors c) Is in a legal position to name whoever he wants to as the contingent beneficiary d) a, b and c above are all false
B
Patrick has been diligent in investing money for his retirement. He has managed to put $100,000 of after-tax money into a tax-deferred annuity. Now he is ready to take it out, and the insurance company that issued the annuity says his guaranteed payment is $8,000 a year for the remainder of his life. This means he can expect a total amount of $200,000 back over his life. How much of each year's annuity payment is taxable? a) $8,000 b) $4,000 c) $2,000 d) $0
B
Select the correct statement about the Social Security system: a) It is, for the most part, a voluntary program b) It is only meant to be a supplement to an individual's major income; it only supplies a minimum floor of income c) The system is completely and fully funded d) The amount each person gets out is nearly exactly what they put in
B
Variable life insurance policies and variable annuities are primarily governed by which agency? a) FBI b) SEC ,c) EPO d) NAIC
B
What does the incontestable clause of a life insurance policy do? a) It keeps the cash value from losing value if the premium is not paid b) It keeps the insurer from canceling the policy if, after two years, there is a discovery of error, concealment, or misstatement by the policy owner , c) It insures the insurance company will not be liable for the acts of fraud by its agents d) All the above
B
When the insured of a non-participating paid-up-at-age-65 life insurance policy attains the age of 65, the cash value will equal the face amount. a) True b) False
B
44. When an insured becomes totally and permanently disabled, her condition triggers a provision that keeps the policy in force even though the insured stops making premium payments. This is a/an: a) Accelerated living benefit provision , b) Guaranteed insurability provision' c) Waiver of premium provision d) None of the above
C
Bill holds two jobs. If Bill were to apply for an insurance policy and the insurer reviews the risk exposure based on his occupation, which of the following would the insurer most likely use to classify him? The job: a) Which would constitute the highest premium b) That Bill has worked at the longest c) That represents the highest hazard d) That Bill devotes the most time to every week
C
Choose the correct statement about a cost of living rider. The policy owner: a) Is only charged a flat fee to have the rider attached b) Could experience a decrease in amount of the policy if the CPI decreases c) Pays an additional premium for the extra protection the rider provides and will see the face amount of the contract increase according to the increase - of the index d) All the above
C
From the descriptions below, identify which one is a term policy: a) The policy contains a provision that provides non-forfeiture options. The owner pays premiums for 25 years after which payments are no longer required yet coverage is still in force b) The policy states premiums are to be paid every year. At the end of 15 years the cash value represents about 25% of the total face amount c) Each year the premium increases as the insured grows older. After several years the coverage and premiums end simultaneously. Cash value is not created d) The premium increases after five years then remains the same until it is paid up at age 65 '
C
In an overall comparison of a savings account and a tax-deferred annuity, where the savings account and annuity both pay the same interest, on the same principal amount, and for the same period of time, which will generate the highest return on investment dollars? a) The savings account and annuity will be about the same, even after the taxes b) The savings account will pay more because of commissions paid on the annuity c) The annuity will pay more because of the tax deferral qualities it has d) The savings account will pay more because of the FDIC
C
In the life insurance planning process, the "blackout period" is considered: a) The period of time after a life insurance application is written and the date the coverage takes effect b) The period of time when there is not enough income available as required by the insured's beneficiaries c) The period of time when a surviving spouse does not receive any Social Security benefits d) None of the above
C
Inflation can have a tremendous eroding effect on the purchasing power of benefits that are received from a disability income policy. What type of supplementary benefit rider can be used by the insured to offset the effects of inflation? a) Social insurance supplement rider b) Guaranteed purchase option rider c) Cost of living adjustment rider d) Inflation offset rider
C
Insurance companies have several departments handling various responsibilities in the issuance of policies. Which department is primarily involved with the selection of risks? a) The sales unit b) The claims unit c) The underwriting unit d) The actuarial unit
C
The dividends and cash value continue, and all features of the policy remain in force, even though the insurance company, not the owner, is making the premiums. This is a description of a rider? a) Cost of living b) Return of cash value c) Waiver of premium d) None of the above
C
There are four basic classes of life insurance. All of the selections listed below are regarded as ordinary insurance, except: a) A l~fe paid-up-at-age-55 pollcy b) A 10-year endowment contract c) A group life insurance policy d). Term life insurance policy
C
When premiums are paid into a universal life insurance policy, insurers,must make certain adjustments to the cash value. The company will add the current premium paid, and: a) Deduct for expenses and mortality costs b) Deduct for general expense charges only c) Deduct for expenses and mortality costs, then add current interest d) The current interest
C
All of the following are true regarding a policyowner that ceases making premium payments on a 10-pay life policy and selects the extended term insurance option, except: a) The face amount will be the same on the new extended term plan as the old 10-pay life policy b) Premium payments no longer have to be made C) The extended term policy will be in force a certain period and then expire d) The extended term policy will reflect the same cash value as the original , policy
D
An annuity which may be used to help fund retirement in a few years maintains a 'separate account." The owner purchases "accumulation units." This is called a annuity? a) Qualified b) Fixed c) Flexible d) Variable
D
Assume two people apply for life insurance with exactly the same monthly premiums. One individual buys a whole life policy, and the other, a 10-year renewable term plan. Both are standard risks with no difference in their age or health rating. Select the statement from below which is false: a) The whole life policy wiil generate a larger cash value b) Stopping premium payments on the whole life plan may trigger an option of having the cash value pay for premiums. This will have the effect of reducing the overall death benefit c) The 10-year renewable term contract will have a premium increase every 10 years while the whole life policy premium remains level d) The whole life policy will pay a higher amount to the beneficiary should the insured die within the first 10 years
D
Choose the payments from an insurance policy which are not subject to federal income taxes: a) Any part of the death benefit paid as the resuit of choosing the "life income" settlement option b) The death benefit paid to a beneficiary in a lump sum C) Any cash value received upon the surrender of a life insurance policy d) None of the above
V
