LIFE INSURANCE EXAM
Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value? a) Predicted needs of the family after the insured's death. b) Insured's current and future income. c) Insured's annual expenses. d) Effect of inflation on income over time.
a) Predicted needs of the family after the insured's death.
An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What option does this describe? Reduction of Premium Accumulation at Interest Cash option Flexible Premium
a) Reduction of Premium
#38. All of the following are marketing arrangements used by insurers EXCEPT a) Reinsurance System. b) General Agency System. c) Direct Response Marketing System. d) Independent Agency System.
a) Reinsurance System.
#74. Which of the following is INCORRECT concerning a noncontributory group plan? a) The employees receive individual policies. b) They help to reduce adverse selection against the insurer. c) They require 100% employee participation. d) The employer pays 100% of the premiums.
a) The employees receive individual policies.
When a fixed annuity owner pays a monthly annuity premium to the insurance company, where is this money placed? a) The insurance company's general account b) Forwarded to an investor c) Each contract's separate account d) The annuity owner's account
a) The insurance company's general account
#32. A group of 15 skydivers met at a seminar and began talking about life insurance during a break. Because it was expensive to get individual life insurance, they decided to band together to form a small group so that they could qualify for group life insurance. After they applied for group life insurance, they were rejected. Why? a) The purpose of the group was to purchase life insurance. b) Their profession poses too high of a risk for the insurer. c) There are not enough people in the group to qualify for group life insurance. d) The group has not been established for long enough.
a) The purpose of the group was to purchase life insurance.
Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client? a) Limited pay whole life b) Interest-sensitive whole life c) Life annuity with period certain d) Increasing term
a) Limited pay whole life
A rider attached to a life insurance policy that provides coverage on the insured's family members is called the a) Other-insured rider. b) Change of insured rider. c) Juvenile rider. d) Payor rider.
a) Other-insured rider.
Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value? a) Predicted needs of the family after the insureds death. b) Insureds current and future income. c) Insureds annual expenses. d) Effect of inflation on income over time.
a) Predicted needs of the family after the insureds death.
#61. Which of the following statements concerning buy-sell agreements is true? a) Buy-sell agreements pay in the event of a medical emergency. b) Buy-sell agreements are normally funded with a life insurance policy. c) Premiums paid are deductible as a business expense. d) Benefits received are considered income taxable.
b) Buy-sell agreements are normally funded with a life insurance policy.
#97. Which of the following will NOT be considered unfair discrimination by insurers? a) Assigning different risk classifications to applicants based on gender identity b) Discriminating in benefits and coverages based on the insured's habits and lifestyle c) Charging applicants with similar health histories different premiums based on their ethnicity d) Cancelling individual coverage based on the insured's marital status
b) Discriminating in benefits and coverages based on the insured's habits and lifestyle
All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT? a) An offer to share in commissions generated by the sale. b) Dividends from a mutual insurer. c) An offer of employment. d) Stocks, securities, or bonds.
b) Dividends from a mutual insurer.
#3. The requirement that agents not commingle insurance monies with their own funds is known as a) Accepted accounting principal. b) Fiduciary responsibility. c) Premium accountability. d) Express authority.
b) Fiduciary responsibility.
In life insurance policies, cash value increases a) Are only taxed when the owner reaches age 65. b) Grow tax deferred. c) Are income taxable immediately. d) Are taxed annually.
b) Grow tax deferred
#18. Which of the following is true of a children's rider added to an insured's permanent life insurance policy? a) Each child covered must show evidence of insurability. b) It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age. c) It is permanent insurance. d) The policy covers only the natural children of the insured.
b) It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age.
#75. An insured buys a 5-year level premium term policy with a face amount of $10,000. The policy also contains renewability and convertibility options. When the insured renews the policy in 5 years, what will happen to the premium? a) It will increase each year during the next 5 years as the face amount increases each year. b) It will increase because the insured will be 5 years older than when the policy was originally purchased. c) It will remain the same for the new 5-year term. d) It will decrease for the new 5-year term since the insured is now a lesser risk to the company.
b) It will increase because the insured will be 5 years older than when the policy was originally purchased.
#60. Which nonforfeiture option provides coverage for the longest period of time? a) Accumulated at interest b) Reduced paid-up c) Extended term d) Paid-up option
b) Reduced paid-up
#44. Which of the following best describes taxation during the accumulation period of an annuity? a) The growth is subject to immediate taxation. b) Taxes are deferred. c) The annuity is subject to state taxes only. d) The annuity is subject to both state and federal taxation.
b) Taxes are deferred.
#71. Which of the following statements is true concerning the creditors of the deceased insured? a) The creditors of the deceased insured have no rights to the proceeds of life insurance under any circumstances. b) The creditors have rights to the proceeds if they can show evidence of valid assignment. c) Anyone may put a lien against the proceeds of a life insurance policy. d) None of the above is true.
b) The creditors have rights to the proceeds if they can show evidence of valid assignment.
#76. Which of the following is true regarding a market value adjusted annuity? a) It provides a level benefit payment. b) The owner is guaranteed a fixed interest rate for a specific period of time. c) The insurer bears all the market risk of changing interest rates. d) There are no penalties for a premature surrender of the annuity.
b) The owner is guaranteed a fixed interest rate for a specific period of time.
#28. An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries? a) One of the beneficiaries will receive 1/3 and the other 2/3 of the proceeds when the insured dies. b) The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive. c) The beneficiary will receive 2/3 of the lump sum up front, and the remaining 1/3 will be paid over time. d) The beneficiary will receive 2/3 of the total benefit, with the final 1/3 payable when the first beneficiary dies.
b) The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.
#43. Which is generally true regarding insureds who have been classified as preferred risks? a) They keep a higher percentage of any interest earned on their policies. b) Their premiums are lower. c) They can borrow higher amounts off of their policies. d) They can decide when to pay their monthly premiums.
b) Their premiums are lower.
#72. When an individual purchases insurance, what risk management technique is he or she practicing? a) Retention b) Transfer c) Avoidance d) Sharing
b) Transfer
#94. The Waiver of Cost of Insurance rider is found in what type of insurance? a) Juvenile Life b) Universal Life c) Whole Life d) Joint and Survivor
b) Universal Life
#39. What is the name of the insured who enters into a viatical settlement? a) Viatical broker b) Viator c) Third party d) Contingent
b) Viator
When a producer is suspected of being in violation of an insurance law or regulation, which of the following would require the producer to stop committing the act of violation? a) A hearing b) A cease and desist order c) A license suspension d) An executive order
b) A cease and desist order
Which of the following is another term for an authorized insurer? a) Legal b) Admitted c) Certified d) Licensed
b) Admitted
A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision? a) Assignment b) Automatic premium loan c) Waiver of premium d) Incontestability period
b) Automatic premium loan
Which of the following provisions in annuity contracts allow the owner to surrender the annuity if interest rates drop to a specified level? a) Annuitization b) Bail-out c) Surrender d) Nonforfeiture
b) Bail-out
Which of the following is true about the premium on the children's rider in a life insurance policy? a) It decreases when an adopted child is added to the policy. b) It remains the same no matter how many children are added to the policy. c) It decreases when the oldest child reaches the age of 21. d) It increases when a newborn baby is added to the policy.
b) It remains the same no matter how many children are added to the policy.
Which of the following statements is TRUE concerning the Accidental Death Rider? a) It is only available in group insurance. b) It will pay double or triple the face amount. c) It is also known as a triple indemnity rider. d) This rider is only available to insureds over the age of 65.
b) It will pay double or triple the face amount.
A producer who fails to act as a fiduciary is guilty of a a) Class A violation. b) Misdemeanor. c) Felony. d) 1st degree offense.
b) Misdemeanor.
All of the following are factors that an underwriter could use to select and classify risk EXCEPT a) Avocation. b) National origin. c) Morals. d) Occupation.
b) National origin.
During replacement of life insurance, a replacing insurer must do which of the following? a) Send a copy of the Notice Regarding Replacement to the Department of Insurance b) Obtain a list of all life insurance policies that will be replaced c) Guarantee a replacement for each existing policy d) Designate a new producer for a replaced policy
b) Obtain a list of all life insurance policies that will be replaced
What type of licensee represents the insurance company? a) Broker b) Producer c) Consultant d) Agency
b) Producer
Which nonforfeiture option provides coverage for the longest period of time? a) Accumulated at interest b) Reduced paid-up c) Extended term d) Paid-up option
b) Reduced paid-up
All of the following are considered unfair trade practices in the business of insurance EXCEPT a) Defamation. b) Sharing commissions. c) Boycott. d) Rebating.
b) Sharing commissions.
Which of the following would provide an underwriter with information concerning an applicants health history? a) The inspection report b) The Medical Information Bureau c) A medical examination d) The agents report
b) The Medical Information Bureau
Which of the following statements is true concerning the creditors of the deceased insured? a) The creditors of the deceased insured have no rights to the proceeds of life insurance under any circumstances. b) The creditors have rights to the proceeds if they can show evidence of valid assignment. c) Anyone may put a lien against the proceeds of a life insurance policy. d) None of the above is true.
b) The creditors have rights to the proceeds if they can show evidence of valid assignment.
J transferred his life insurance policy to his son two years before his death. Which of the following is true? a) Because the policy has been transferred, it will not be included in Js taxable estate. b) The entire face value of the policy will be included in Js taxable estate. c) The interest portion of the policy will be included in Js taxable estate. d) The unpaid premiums on the policy will be deducted from Js taxable estate.
b) The entire face value of the policy will be included in Js taxable estate.
A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums? a) The insured will have to pay premiums for 6 months. If at the end of this period the father is still disabled, the insured will be refunded the premiums. b) The insureds premiums will be waived until she is 21. c) The premiums will become tax deductible until the insureds 18th birthday. d) Since it is the policyowner, and not the insured, who has become disabled, the life insurance policy will not be affected.
b) The insureds premiums will be waived until she is 21.
An employee quits his job on May 15 and doesnt convert his Group Life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. Which of the following statements best describes what will happen? a) The insurer will pay nothing because the employee has terminated his group insurance and hasnt started the individual one. b) The insurer will pay the full death benefit from the group policy to the beneficiary. c) The insurer will pay a reduced death benefit to the beneficiary. d) The insurer will pay the death benefit minus one months premium.
b) The insurer will pay the full death benefit from the group policy to the beneficiary.
Which is generally true regarding insureds who have been classified as preferred risks? a) They keep a higher percentage of any interest earned on their policies. b) Their premiums are lower. c) They can borrow higher amounts off of their policies. d) They can decide when to pay their monthly premiums.
b) Their premiums are lower
How long will the beneficiary receive payments under the single life settlement option? a) Until the insureds age 100 b) Until the beneficiarys death c) Until the insureds death d) For a specified period of time
b) Until the beneficiarys death
#50. When a producer was reviewing a potential customer's coverage written by another company, the producer made several remarks that were maliciously critical of that other insurer. The producer could be found guilty of a) Discrimination. b) Nothing, unless the remarks were in writing c) Defamation. d) Misrepresentation.
c) Defamation.
#8. When an employee terminates coverage under a group insurance policy, coverage continues in force a) Until the employee can obtain coverage under a new group plan. b) Until the employee notifies the group insurance provider that coverage conversion policy is issued. c) For 31 days. d) For 60 days.
c) For 31 days.
Which is TRUE about the cash surrender nonforfeiture option? a) The policy remains active for some time after the policyholder opts for cash surrender. b) The policyholder receives the original cash value of the policy. c) Funds exceeding the premium paid are taxable as ordinary income. d) After the cash surrender, the insured is covered for a grace period of one month.
c) Funds exceeding the premium paid are taxable as ordinary income.
All of the following are beneficiary designations EXCEPT? a) Contingent. b) Primary. c) Specified. d) Tertiary.
c) Specified.
The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive? a) $0 b) $50,000 (50% of the policy value) c) $100,000 d) $300,000 (triple the amount of policy value)
c) $100,000
A producer moved into a new house 5 days ago. How much more time does he have to report the address change to the DOI? a) 10 days b) 15 days c) 25 days d) 5 days
c) 25 days
If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered a) A required disclosure. b) A legal representation of the Association. c) An unfair trade practice. d) A misrepresentation.
c) An unfair trade practice.
If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to a) Lower its insurability standards. b) Refuse to issue the policy. c) Charge a higher premium. d) Require a yearly medical examination.
c) Charge a higher premium.
According to the entire contract provision, what document must be made part of the insurance policy? a) Agents report b) Outline of coverage c) Copy of the original application d) Buyer's Guide
c) Copy of the original application
Which of the following best describes annually renewable term insurance? a) Neither the premium nor the death benefit is affected by the insured's age. b) It provides an annually increasing death benefit. c) It is level term insurance. d) It requires proof of insurability at each renewal.
c) It is level term insurance.
Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report a) Must be advised that a copy of the report is available to anyone who requests it. b) May sue the reporting agency in order to get inaccurate data corrected. c) Must be informed of the source of the report. d) Are entitled to obtain a copy of the report from the party who ordered it.
c) Must be informed of the source of the report.
A rider attached to a life insurance policy that provides coverage on the insured;s family members is called the a) Juvenile rider. b) Payor rider. c) Other-insured rider. d) Change of insured rider.
c) Other-insured rider.
An applicant wants to buy a policy that has a cash value element. Which type should she buy? a) Investment b) Term c) Permanent d) Stock
c) Permanent
The Federal Fair Credit Reporting Act a) Regulates telemarketing. b) Prevents money laundering. c) Regulates consumer reports. d) Protects customer privacy.
c) Regulates consumer reports.
Which of the following statements is NOT true regarding the Director of Insurance in this state? a) The Director must have a surety bond paid for by the State. b) The Director may charge individuals with perjury. c) The Director is elected for the term of 4 years. d) The Director is appointed by the Governor.
c) The Director is elected for the term of 4 years.
In the transaction of insurance, which of the following is considered to be representing the client? a) The agent b) The insurer c) The broker d) The Commissioner
c) The broker
When a life insurance policy was issued, the policyowner designated a primary and a contingent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident, and it was impossible to determine who died first. Which of the following would receive the death benefit? a) The insureds estate b) The primary beneficiary's estate c) The insureds contingent beneficiary d) The insurance company
c) The insureds contingent beneficiary
In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT a) The premium. b) The amount of insurance. c) The type of investment. d) The length of coverage.
c) The type of investment.
#79. Insurance producers in South Carolina must provide a notice about the insurer's privacy policies and practices to customer a) Initially when dealing with them. b) Annually. c) When obtaining a new policy and the notice has been revised since last given. d) All these are true.
d) All these are true.
Insurance producers in South Carolina must provide a notice about the insurer's privacy policies and practices to customer a) Initially when dealing with them. b) Annually. c) When obtaining a new policy and the notice has been revised since last given. d) All these are true.
d) All these are true.
#53. If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered a) A misrepresentation. b) A required disclosure. c) A legal representation of the Association. d) An unfair trade practice.
d) An unfair trade practice.
#95. Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement? a) Term insurance only b) Permanent insurance only c) Universal life insurance only d) Any form of life insurance
d) Any form of life insurance
#23. When must insurable interest exist in a life insurance policy? a) At the time of policy delivery b) When there is a change of the beneficiary c) At the time of loss d) At the time of application
d) At the time of application
#48. An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his a) Experience Rating. b) Group rate. c) Insurer's scheduled rate. d) Attained age.
d) Attained age.
#58. Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium? a) Extended term b) Reinstatement c) Reduced paid-up option d) Automatic premium loan
d) Automatic premium loan
#64. The accelerated benefits provision will provide for an early payment of the death benefit when the insured a) Needs to borrow money. b) Has earned enough credits. c) Becomes disabled. d) Becomes terminally ill.
d) Becomes terminally ill.
#40. All of the following are duties and responsibilities of producers at the time of application EXCEPT a) Explain the nature and type of any receipt the producer is giving to the applicant. b) Probe beyond the stated questions if the producer feels the applicant is misrepresenting or concealing information. c) Check to make sure that there are no unanswered questions on the application. d) Change any incorrect statement on the application by personally initialing next to the corrected statement.
d) Change any incorrect statement on the application by personally initialing next to the corrected statement.
#11. Which of the following is NOT typically excluded from life policies? a) Self-inflicted death b) Death that occurs while a person is committing a felony c) Death due to war or military service d) Death due to plane crash for a fare-paying passenger
d) Death due to plane crash for a fare-paying passenger
#57. A producer agent must do all of the following when delivering a new policy to the insured EXCEPT a) Explain the policy provisions, riders, and exclusions. b) Collect any premium due. c) Explain the rating procedures if the policy is rated differently than applied for. d) Disclose commissions earned from the sale of the policy.
d) Disclose commissions earned from the sale of the policy.
#73. When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount? a) In lesser amounts for the remaining policy term of age 100. b) Equal to the cash value surrendered from the policy c) The same as the original policy minus the cash value d) Equal to the original policy for as long as the cash values will purchase.
d) Equal to the original policy for as long as the cash values will purchase.
#37. An agent selling variable annuities must be registered with a) Department of Insurance. b) The Guaranty Association. c) SEC. d) FINRA.
d) FINRA.
#49. Circulating deceptive sales material to the public is what type of Unfair Trade Practice? a) Defamation b) Coercion c) Misrepresentation d) False advertising
d) False advertising
#67. When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy? a) It is increased when extra premiums are paid. b) It decreases over the term of the policy. c) It remains the same as the original policy, regardless of any differences in value. d) It is reduced to the amount of what the cash value would buy as a single premium.
d) It is reduced to the amount of what the cash value would buy as a single premium.
#99. Which of the following is TRUE regarding the annuity period? a) During this period of time the annuity payments grow interest tax deferred. b) It is also referred to as the accumulation period. c) It is the period of time during which the annuitant makes premium payments into the annuity. d) It may last for the lifetime of the annuitant.
d) It may last for the lifetime of the annuitant.
An insured buys a 5-year level premium term policy with a face amount of $10,000. The policy also contains renewability and convertibility options. When the insured renews the policy in 5 years, what will happen to the premium? a) It will remain the same for the new 5-year term. b) It will decrease for the new 5-year term since the insured is now a lesser risk to the company. c) It will increase each year during the next 5 years as the face amount increases each year. d) It will increase because the insured will be 5 years older than when the policy was originally purchased.
d) It will increase because the insured will be 5 years older than when the policy was originally purchased.
#34. Which Universal Life option has a gradually increasing cash value and a level death benefit? a) Juvenile life b) Term insurance c) Option B d) Option A
d) Option A
#87. An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called a) Modified Endowment Contract (MEC). b) Level term life. c) Graded premium whole life. d) Single premium whole life.
d) Single premium whole life.
#78. Which of the following would help prevent a universal life policy from lapsing? a) Face amount b) Adjustable premium c) Corridor of insurance d) Target premium
d) Target premium
#59. Children's riders attached to whole life policies are usually issued as what type of insurance? a) Variable life b) Adjustable life c) Whole life d) Term
d) Term
#4. Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information? a) Unfair Trade Practices Law b) The Guaranty Association c) Consumer Privacy Act d) The Fair Credit Reporting Act
d) The Fair Credit Reporting Act
#88. Which of the following is NOT true regarding the annuitant? a) The annuitant's life expectancy is taken into consideration for the annuity. b) The annuitant receives the annuity benefits. c) The annuitant must be a natural person. d) The annuitant cannot be the same person as the annuity owner.
d) The annuitant cannot be the same person as the annuity owner.
#77. An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date? a) The date of policy delivery b) The date of issue c) The date of application d) The date of medical exam
d) The date of medical exam
#31. An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible? a) It is impossible to transfer a policy. b) The insured would have to surrender his policy to the insurer, and his friend could then ask to buy it. c) The insured can transfer the policy to his friend and then notify the insurer of the change. d) The insured will need a written consent of the insurer.
d) The insured will need a written consent of the insurer.
#33. When a life insurance policy was issued, the policyowner designated a primary and a contingent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident, and it was impossible to determine who died first. Which of the following would receive the death benefit? a) The insurance company b) The insured's estate c) The primary beneficiary's estate d) The insured's contingent beneficiary
d) The insured's contingent beneficiary
#29. A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums? a) The premiums will become tax deductible until the insured's 18th birthday. b) Since it is the policyowner, and not the insured, who has become disabled, the life insurance policy will not be affected. c) The insured will have to pay premiums for 6 months. If at the end of this period the father is still disabled, the insured will be refunded the premiums. d) The insured's premiums will be waived until she is 21.
d) The insured's premiums will be waived until she is 21.
#13. Not all losses are insurable, and there are certain requirements that must be met before a risk is a proper subject for insurance. These requirements include all of the following EXCEPT a) The loss must not be catastrophic. b) There must be a sufficient number of homogeneous exposure units to make losses reasonably predictable. c) The loss produced by the risk must be definite. d) The loss may be intentional.
d) The loss may be intentional.
#55. Once the Director issues a cease and desist order, how soon must an insurer comply with the order? a) Within 3 days b) Within 10 days c) Within 15 days d) Within 30 days
d) Within 30 days
#54. Is it ever possible for more than one producer to split the commissions on an insurance transaction in this state? a) No, this could cause a conflict of interest. b) No, it is not possible under any circumstances. c) Yes, it is possible as long as they are not related. d) Yes, it is possible as long as both are licensed for that line of business.
d) Yes, it is possible as long as both are licensed for that line of business.
An insurer may be fined for nonwillful or for willful violations of insurance laws with which of the following respective fines: a) $10,000/ $20,000. b) $5,000/ $10,000. c) $20,000/ $30,000. d) $15,000/ $30,000.
d) $15,000/ $30,000.
All of the following would be considered rebating EXCEPT a) An agent offers the use of his lake house to a client as an inducement to buy an insurance policy from him. b) An agent offers to share his commission with a policyholder. c) An agent offers tickets to a baseball game as an inducement to buy insurance. d) An agent misrepresents policy benefits to convince a policyowner to replace policies.
d) An agent misrepresents policy benefits to convince a policyowner to replace policies.
The minimum interest rate on an equity indexed annuity is often based on a) The returns from the insurance company's separate account. b) The annuitant's individual stock portfolio. c) The insurance company's general account investments. d) An index like Standard and Poor's 500.
d) An index like Standard and Poor's 500.
What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident? a) Spendthrift Clause b) Settlement Clause c) Nonforfeiture Clause d) Common Disaster Clause
d) Common Disaster Clause
When must an IRA be completely distributed when a beneficiary is not named? a) Due date of beneficiarys tax return including extensions. b) December 31 of the year following the year of the owners death. c) Due date of the deceased owners final tax return including extensions. d) December 31 of the year that contains the fifth anniversary of the owners death.
d) December 31 of the year that contains the fifth anniversary of the owners death.
When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount? a) In lesser amounts for the remaining policy term of age 100. b) Equal to the cash value surrendered from the policy c) The same as the original policy minus the cash value d) Equal to the original policy for as long as the cash values will purchase.
d) Equal to the original policy for as long as the cash values will purchase.
An agent selling variable annuities must be registered with a) Department of Insurance. b) The Guaranty Association. c) SEC. d) FINRA.
d) FINRA.
A Universal Life insurance policy has two types of interest rates that are called a) Option A and Option B. b) Fixed and Variable. c) Minimum and Target. d) Guaranteed and Current.
d) Guaranteed and Current.
Which of the following is an example of liquidity in a life insurance contract? a) The death benefit paid to the beneficiary b) The flexible premium c) The money in a savings account d) The cash value available to the policyowner
d) The cash value available to the policyowner
Who is the owner and who is the beneficiary on a Key Person Life Insurance policy? a) The employer is the owner and the key employee is the beneficiary. b) The key employee is the owner and beneficiary. c) The key employee is the owner and the employer is the beneficiary. d) The employer is the owner and beneficiary.
d) The employer is the owner and beneficiary.
Not all losses are insurable, and there are certain requirements that must be met before a risk is a proper subject for insurance. These requirements include all of the following EXCEPT a) The loss must not be catastrophic. b) There must be a sufficient number of homogeneous exposure units to make losses reasonably predictable. c) The loss produced by the risk must be definite. d) The loss may be intentional.
d) The loss may be intentional.
Are insurance company underwriters allowed to discriminate? a) No, higher risks pay higher premium b) No, discrimination is an unfair practice c) Yes, but only for gender d) Yes, but not unfairly
d) Yes, but not unfairly
Because an agent is using stationery with the logo of an insurance company, applicants for insurance assume that the agent is authorized to transact on behalf of that insurer. What type of agent authority does this describe? Implied Assumed Apparent Express
Apparent
Which policy component decreases in decreasing term insurance? A.Dividend B.Premium C.Face amount D. Cash value
C. Face Amount
A rider attached to a life insurance policy that provides coverage on the insured's family members is called the? a) Juvenile rider. b) Payor rider. c) Other-insured rider. d) Change of insured rider.
C. Other Insured
An applicant wants to buy a policy that has a cash value element. Which type should she buy? a) Investment b) Term c) Permanent d) Stock
C. Permanent
#66. Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid a) For 20 years or until death, whichever occurs first. b) Until the policyowner reaches age 65. c) For at least 20 years. d) Until the policyowner's age 100, when the policy matures.
) For 20 years or until death, whichever occurs first.
#6. Conducting insurance in this state without a license would be considered a a) Unfair trade practice. b) Misdemeanor. c) Felony. d) Minor offense.
b) Misdemeanor.
When J. applied for a life insurance policy, the agent informed him that a medical exam would be required. The exam may be completed by? a) A physician of the applicant's choice and at his expense. b) A home office underwriter. c) A paramedic or examining physician at the insurer's expense. d) The agent.
Answer: C A paramedic or examining physician at the insurers expense
All of the following are unfair claims settlement practices EXCEPT a) Failing to adopt and implement standards for settling claims. b) Failing to acknowledge communication pertaining to a claim. c) Suggesting negotiations in settling the claim. d) Refusing to pay claims without conducting an investigation.
Answer: C Suggesting Negotiations in settling a claim
An insurance producer has not been appointed to an insurance company. Who is the producer considered to represent? a) The state's Guaranty Fund b) The Department of Insurance c) The insurer d) The client
d) The client
#35. For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become a) More active. b) Larger. c) Smaller. d) Older.
b) Larger.
A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the Secondary beneficiary. Contingent beneficiary. Irrevocable beneficiary. Revocable beneficiary.
Revocable beneficiary.
How many days does a producer have to notify the Department of a change of address? a) 30 b) 60 c) 90 d) 10
a) 30
#69. Which of the following is NOT an allowable 1035 exchange? a) A whole life insurance policy is exchanged for a term insurance policy. b) A whole life insurance policy is exchanged for a Universal life insurance policy. c) An annuity is exchanged for another annuity. d) A life insurance policy is exchanged for an annuity.
a) A whole life insurance policy is exchanged for a term insurance policy.
#83. Which of the following premium payment modes will incur the lowest overall payment? a) Annual b) Semi-annual c) Quarterly d) Monthly
a) Annual
#10. In an annuity, the accumulated money is converted into a stream of income during which time period? a) Annuitization period b) Payment period c) Amortization period d) Conversion period
a) Annuitization period
All of the following are personal uses of life insurance EXCEPT A Buy-sell agreement B Survivor protection C Estate creation. D Cash accumulation.
A> Buy - Sell Agreement
#22. All of the following entities regulate variable life policies EXCEPT a) The Insurance Department. b) The Guaranty Association. c) Federal government. d) The SEC.
b) The Guaranty Association.
#30. Who is an insurance producer? a) Any person licensed to sell, solicit or negotiate insurance b) Any person licensed under the laws of another state c) Any person employed by an insurance company d) Any person who represents the insured in the sale of insurance
a) Any person licensed to sell, solicit or negotiate insurance
#25. An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision? a) Common Disaster b) Accidental Death c) Survivor Life d) Second-to-Die
a) Common Disaster
#68. A long stretch of national economic hardship causes a 7% rate of inflation. A policyowner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change? a) Cost of Living Rider b) Value Adjustment Rider c) Return of Premium Rider d) Inflation Rider
a) Cost of Living Rider
#41. An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering a(n) a) Inspection report. b) Medical Information Bureau report. c) Medical examination. d) Attending Physician Statement.
a) Inspection report.
#51. An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied? a) Material misrepresentation b) Waiver c) Utmost Good Faith d) Estoppel
a) Material misrepresentation
#84. An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident, and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do? a) Pay a reduced death benefit b) Pay the full death benefit c) Pay nothing; there was a misrepresentation on the application d) Pay the full death benefit and refund excess premium
a) Pay a reduced death benefit
#92. An applicant wants to buy a policy that has a cash value element. Which type should she buy? a) Permanent b) Stock c) Investment d) Term
a) Permanent
#62. Which of the following types of risk will result in the highest premium? a) Substandard risk b) Standard risk c) Preferred risk d) All risks pay equal premiums
a) Substandard risk
#47. A producer moved into a new house 5 days ago. How much more time does he have to report the address change to the DOI? a) 15 days b) 25 days c) 5 days d) 10 days
b) 25 days
#81. When a producer is suspected of being in violation of an insurance law or regulation, which of the following would require the producer to stop committing the act of violation? a) A hearing b) A cease and desist order c) A license suspension d) An executive order
b) A cease and desist order
#27. Before being issued a license, applicants must submit which of the following to the Director as part of a background check? a) A credit report b) A complete set of fingerprints c) Record of prelicensing education d) A complete set of financial records
b) A complete set of fingerprints
#36. What license or licenses are required to sell variable annuities? a) No license is required b) Both a life insurance license and a securities license c) Only a life insurance license d) Only a securities license
b) Both a life insurance license and a securities license
#17. What term best describes the act of withholding material information that would be crucial to an underwriting decision? a) Breach of warranty b) Concealment c) Withholding d) Leading
b) Concealment
An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What option does this describe? a) Flexible Premium b) Reduction of Premium c) Accumulation at Interest d) Cash option
b) Reduction of Premium
A producer failed to complete the required continuing education credit hours for this compliance period. Within what time period after the deadline may the license be reinstated? a) 30 days b) 3 months c) 6 months d) 12 months
c) 6 months
Which is the primary source of information used for insurance underwriting? a) Medical records b) Private investigations c) Application d) Applicant interviews
c) Application
#86. Which of the following would least likely be considered a legitimate need that would be paid by insurance proceeds? a) Travel expenses for family to come to the funeral b) Debt cancellation c) Day care d) Vacation travel expenses
d) Vacation travel expenses
An insured buys a 5-year level premium term policy with a face amount of $10,000. The policy also contains renewability and convertibility options. When the insured renews the policy in 5 years, what will happen to the premium? a) It will remain the same for the new 5-year term. b) It will decrease for the new 5-year term since the insured is now a lesser risk to the company. c) It will increase each year during the next 5 years as the face amount increases each year. d) It will increase because the insured will be 5 years older than when the policy was originally purchased.
d) It will increase because the insured will be 5 years older than when the policy was originally purchased.
Conducting insurance in this state without a license would be considered a a) Felony. b) Minor offense. c) Unfair trade practice. d) Misdemeanor.
d) Misdemeanor.
What is the term for how frequently a policyowner is required to pay the policy premium? a) Schedule b) Grace period c) Consideration d) Mode
d) Mode
In order to become licensed as a nonresident producer in this state, a person must do which of the following? a) Be licensed as a resident producer for at least 3 years prior to applying in this state b) Spend at least 25% of his or her working time in this state c) Pass a written examination and pay the required fees d) Show proof of a valid license for the same line of authority in the home state
d) Show proof of a valid license for the same line of authority in the home state
What is the name of the insured who enters into a viatical settlement? a) Third party b) Contingent c) Viatical broker d) Viator
d) Viator