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Life Insurance

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has a loan of $5,000 outstanding against her $25,000 traditional whole life policy. If K dies, how much will her beneficiaries receive? A. $5,000 B. $20,000 C. $30,000 D, $25,000

$20,000 Any outstanding loans will be deducted from the face amount at the time of claim, or from the cash values upon surrender, along with any interest due.

Z elects the life refund settlement option for a $250,000 death benefit. Z lives long enough to recover $150,000 of the $250,000 death benefit. How much does his beneficiary receive? A $100,000 B $150,000 C 250,000 D $50,000

A $100,000 With Life Refund, payments are made for the lifetime of the recipient. Upon death, if a recipient has not received an amount equal to the total death benefit, the balance is refunded to the beneficiary, either in a lump sum (cash refund), or in installments (installment refund).

In order to charge a service fee on a contract, a producer in Minnesota must do which of the following? A Create an oral agreement with the applicant B Disclose in writing that the fee is in addition to the premium C Negotiate the fee directly with the insurer D Service fees on contracts are not allowed

B. Disclose in writing that the fee is in addition to the premium A producer may charge a service fee on a contract if the services and fee amounts are disclosed in writing, and that the fees are in addition to the premium.

A convertible term life insurance policy may be converted _____ time(s) for a permanent life policy based on the original or attained age. A. 4 B. 2 C. 3 D. 1

D. 1 A convertible term life insurance policy may be converted 1 time for a permanent policy that provides coverage for the life of the insured.

In Minnesota, consumer records collected for a producer to make a recommendation must be maintained for how many years? A. 3 B. 6 C. 5 D. 10

D. 10 Consumer records and information collected for a producer to make a recommendation must be maintained for 10 years after the insurance transaction is completed by the insurer.

A(n)____________ is the person or entity that is covered by an insurance policy. A Insured B Producer C Owner D Agency

A Insured The insured is the person whose life is being used for insurability purposes for a life and/or health insurance policy.

When does the annuitization period begin? A When the policyowner elects to convert the annuity into an income benefit payment B At the specified age stated in the policy, usually age 100 C When the annuitant reaches age 70 1/2 D When the annuitant reaches age 59 1/2

A When the policyowner elects to convert the annuity into an income benefit payment The annuitization period begins once the policyowner elects to convert the deferred annuity into an income benefit payment.

Distributions from a Modified Endowment Contract (MEC) made on or after age _____ are not subject to any tax penalties. A. 59 1/2 B. 65 C. 70 1/2 D. 62

A. 59 1/2 For withdrawals of any gains from a MEC prior to age 59 1/2 there is a 10% tax penalty that applies.

Alice is the insured, Bill is the primary beneficiary, and Claire is the contingent beneficiary. Bill dies, then Claire dies, then Alice dies, so who receives the policy proceeds? A. Alice's estate B. Claire C. Bill D. The treasury of the state where Alice lives

A. Alice's Estate With no surviving beneficiaries, the policy proceeds go to Alice's estate.

Contributions to a nonqualified plan are: A. Not tax-deductible B. Fully Tax-deductible C. Tax-deductible up to $50,000 D. Partially Tax-deductible

A. Not tax-deductible Contributions to a nonqualified plan are not tax-deductible.

A partial withdrawal is permitted on which of the following policies? A Variable Whole Life B Universal Life C Whole Life D Current Assumption Whole Life

B Universal Life Policies on a universal life platform allow for partial withdrawals.

The ________ is the amount payable to the beneficiary upon death of the insured named in a life insurance policy. A. Premium refund B. Face Amount C. Loan value D. Cash Value

B. Face Amount The face amount is the death benefit amount payable to the beneficiary upon death of the insured. It is also referred to as the coverage amount.

E has a $10,000 traditional whole life policy with a $4,000 cash value. Premiums paid to date are $3,500. If the policy lapses with a $4,000 loan outstanding, what amount will be taxable as income to E? A $4,000 B $6,000 C $500 D $3,500

C $500 If a policy lapses with an outstanding loan greater than the premium paid in, tax must be paid on the difference. In E's case, that's $500 ($4,000 - $3,500).

In Minnesota, an agency must maintain a complaint file on each agent for how many years? A. 4 B. 5 C. 3 D. 6

D 6 Complaint records, including grievances and allegations, must be maintained for 6 years.

Refusing to insure a person solely because the person is divorced is considered: A Defamation B Misrepresentation C Rebating D Discrimination

D Discrimination It is discrimination for an insurer to refuse to insure, refuse to renew, or limit available coverage solely because of a person's sex or marital status.

Which of the following annuities typically offers no guarantees? A Bonus Interest Rate Annuities B Fixed C Indexed D Variable

D Variable The variable annuity holder assumes all investment risk.

A temporary producer license is issued in Minnesota for up to _______ days. A. 180 B. 30 C. 60 D. 90

A. 180 The Commissioner may issue a temporary producer license for up to 180 days, without requiring the recipient to pass an examination, as necessary for servicing insurance business for a deceased or disabled licensed producer or in the case of a licensed producer entering military service.

Which of the following concerning Noncontributory Group Life insurance is FALSE? A. An employer pays 75% of the premium B. No evidence of inseparability is required on the part of the participant C. The employee pays none of the premium D. 100% Participation is required

A. An employer pays 75% of the premium To minimize the effects of adverse selection, a noncontributory group life policy must cover 100% of the eligible employees. The employer pays 100% of the premium.

Which of the following is not considered rebating? A Giving a policyholder an annual gift of a $25 houseplant B Giving savings bonds to an applicant buying replacement coverage C Providing a long-term client a premium rebate to buy another policy D Increasing the premium in order to purchase the insurer's stock for the applicant

A. Giving a policy holder an annual gift of a $25 houseplant A promotional advertising item of $25 or less or a gift of $25 or less per year is not a rebate if the receipt of the item or gift is not conditioned upon purchase of an insurance policy or product.

XYZ Corporation has 59 employees. The company decides to purchase a group life policy and will pay the total premium. What percentage of employees must participate under this arrangement? A 50% B 100% C 75% D 25%

B 100% The question describes a Noncontributory Plan as the employer (XYZ Corporation) is paying the entire premium, thus 100% participation (all 59 employees) is required.

In Minnesota, a policy of life insurance may not be backdated more than how long before the original application was made? A 60 days B 6 months C 3 months D 1 year

B 6 months A policy of life insurance may not be issued if it contains a provision by which the policy may be backdated more than 6 months before the original application for the insurance was made.

The entire contract typically consists of all of the following, except: A The policy itself B A copy of the cancelled check and receipt C A copy of the application D Any riders

B A copy of the cancelled check and receipt The entire contract consists of the policy, riders, amendments, and a copy of the application. Nothing can be incorporated by reference.

Increases in insurance protection to keep a Current Assumption policy from endowing is provided: A. With full underwriting B. With simply part 1 of the application completed C. With limited underwriting D. Without evidence of insurability

D. Without evidence of insurability It is possible that the cash value will increase too quickly and could cause the policy to mature prior to age 100. To prevent this from happening, the insurer will add a corridor of insurance protection without requiring evidence of insurability to keep the policy from endowing.

The insurance industry is primarily regulated at the _________ level. A State B Federal C Insurers D County

The states have primary responsibility for regulating the insurance industry.

A small business owner used her life insurance policy as collateral for a bank loan. The face amount of the whole life policy was $100,000 and the original amount of the loan was $20,000. If the outstanding loan balance at the time the small business owner died was $10,000, how much will the policy's named beneficiary receive? A $90,000 B $70,000 C $80,000 D $100,000

A $90,000 The collateral assignee, the bank, will take a priority claim on the policy's death benefit limited to the amount of the loan outstanding at the time of death, the named beneficiary will receive the balance. In this case $90,000 ($100,000 - $10,000).

The Attending Physician's Statement (APS) is completed by: A An applicant's physician to provide information about the applicant's medical history B The Medical Information Bureau C A physician providing a required medical exam at the time of application D The agent after the medical questions are answered by the applicant

A An applicant's physician to provide information about the applicant's medical history An Attending Physician's Statement (APS) is used in cases where the individual application and/or medical reports reveal conditions for which more information is required. The treating physician will provide information regarding the medical history of the applicant. An applicant must sign a written release to enable a release of the APS. The insurer pays for this.

___________ are not taxable because they are considered a return of excess premium. A Dividends B Cash Values C Death Benefits D Policy loans

A Dividends Dividends are considered a return of unearned premium which is why are they are paid out income tax free.

Which of the following beneficiary designations prevents a policyowner from assigning the policy, taking a policy loan, or surrendering the policy without the beneficiaries consent? A Irrevocable B Named C Class D Incontestable

A Irrevocable An irrevocable beneficiary has a vested interest in the policy and anything that could affect the values of the policy requires their consent.

If it is known or should be known by the agent that an existing policy is going to be lapsed, forfeited, surrendered or terminated in favor of a new policy, the agent must submit a: A Notice Regarding Replacement B Statement of Release C Notice Regarding Conservation D Cancellation of Service

A Notice Regarding Replacement Replacement rules require a Notice Regarding Replacement.

When an applicant does not smoke, exercises regularly, seldom drinks, and eats moderately and is considered to be a better-than-average risk, they would likely qualify for: A Preferred status and pay a lower premium B Preferred status and pay a higher premium C Substandard status and pay a higher premium D Standard status and pay a standard premium

A Preferred status and pay a lower premium Individuals who meet certain requirements (such as ideal health, height and weight, low occupational stress, etc.) are preferred risks.

If an insurer has not received a certificate of authority from the Commissioner, what are they called? A Unauthorized insurer B Mutual insurer C Fraternal benefit society D Authorized insurer

A Unauthorized insurer An unauthorized insurer is one that has not received a certificate of authority from the Commissioner. It is illegal for an unauthorized insurer to perform any insurance business in this state.

Which of the following is false about a Minnesota nonresident producer? A The home state of a nonresident producer must be on a reciprocal basis with Minnesota B A producer licensed in another state who applies for a license within 120 days after moving to Minnesota is exempt from prelicensing education and exam requirements C The nonresident producer must hold a resident license in good standing in the home state D The nonresident producer must submit the required application and fee

B A producer licensed in another state who applies for a license within 120 days after moving to Minnesota is exempt from prelicensing education and exam requirements A producer licensed in another state who applies for a license within 90 days after moving to Minnesota is exempt from prelicensing education and exam requirements for the line of authority held in the prior state.

______ are primarily social organizations that engage in charitable and benevolent activities consisting of members of a given faith, lodge, or order, and are usually organized as non-profits. A Mutual Insurance Companies B Fraternal Benefit Societies C Domestic Insurance Companies D Stock Insurance Companies

B Fraternal Benefit Societies This question describes a Fraternal Benefit Society

An employer in Minnesota must notify a covered employee of insurance continuation rights within ____ days after termination of or layoff from employment. A. 10 B. 14 C. 21 D. 7

B. 14 An employer must notify a covered employee of insurance continuation rights within 14 days after termination of or layoff from employment.

The producer must deliver an insurance policy within how many days after receiving the premium? A. 21 days B. 30 days C. 15 days D. 5 days

B. 30 Days An agent must deliver policies or certificates within 30 working days of receiving the premium, unless the insured agrees in writing that the agent may keep such evidence of insurance.

Tom elects the Life Income with 10-year Period Certain settlement option. Tom dies in year 6. The beneficiary receives payments for _______. A 6 years B 4 years C 10 years D Life

B. 4 years With Life Income Period Certain, payments are guaranteed for the lifetime of the recipient or a specified period of time, whichever is longer. If the recipient dies prior to the end of the period certain, the payments continue to another beneficiary until the end of the period certain.

A partnership has 3 partners who each have an equal ownership interest in their $3,000,000 business. How many policies would have to be purchased under a traditional cross purchase buy-sell agreement plan? A. 1 B. 6 C. 3 D. 9

B. 6 There would need to be 6 policies purchased in a traditional cross purchase buy-sell agreement plan (3x2). Each partner would be acquiring a policy on the other two partners.

Q has an ordinary straight whole life insurance policy for $100,000. Due to a change in circumstances, Q finds that there is now a need for more coverage, but the budget is not sufficient for another similar policy. What can Q do to satisfy the need for additional coverage at a low price? A Ask for an increase in the existing policy's face amount B Add a term rider C Add an accidental death rider D Use the cash values of the policy to cover the difference

B. Add a term rider Adding a term life insurance rider will allow for the additional coverage to be put into place at an affordable price, without having to acquire another policy. Ordinary straight whole life does not allow for an increase in face amount, as it is a fixed benefit policy.

In Minnesota, a producer submits an insurance application to an insurer, but they are not appointed. What must happen for this transaction to be valid? A This transaction will not be valid because the producer was not appointed B The producer only needs the insurer's permission C The producer must be appointed by that insurer within 15 days D The producer must be representing an insured

C The producer must be appointed by that insurer within 15 days As long as the producer has permission and is appointed within 15 days of the application being submitted, it is permissible for an unappointed producer to represent the insurer. A producer does not represent the insured, only a broker does.

What is the primary purpose of the free look period? A It forces producers to deliver policies in person to resell the policy to reduce returns and early policy lapses B It is a way to offer a legal rebate, 10-30 days of 'free' insurance C To allow the applicant time to reconsider their purchase decision and to see if the policy was issued as applied for D It is a marketing strategy of major insurers to get applicants to sign up for a policy

C To allow the applicant time to reconsider their purchase decision and to see if the policy was issued as applied for The free look allows the policyowner a specified number of days following receipt of the policy to look it over. If dissatisfied for any reason, the owner has the right to return it for a full refund of any premiums paid

In Minnesota, STOLI transactions are: A Allowed with the insured's written consent B Policies which are sold within 5 years of purchase C Violations of the Minnesota Insurable Interest Act D Life settlement contracts

C Violations of the Minnesota Insurable Interest Act Stranger Originated Life Insurance (STOLI) transactions are violations of the Minnesota Insurable Interest Act

An insurance policy form is effective if not disapproved within how many days of submission to the Commissioner? A. 10 B. 30 C. 60 D. 20

C. 60 If the Commissioner does not disapprove or otherwise object within 60 days after the filing of any form, the form will be deemed approved.

If the insured of a Whole Life policy is on claim with a Waiver of Premium rider, what happens to the cash values? A. The cash value is frozen until regular premium payments resume B. They are reduced by the cost of the rider C. Cash value and dividends are not affected D. They are reduced by the total cost of the policy

C. Cash value and dividends are not affected Under a Waiver of Premium rider, cash value and dividends continue as if normal premium payments have been made.

Bess received information in regard to her individual Term Insurance explaining that she could convert the policy by doing which of the following? A. Prove insurability and pay higher premiums based on her attained age B. Prove insurability and pay the same level premium C. Without providing proof of insurability and pay the same level premium D. Without providing proof of insurability, pay higher premiums based on her attained age

C. Without providing proof of insurability, pay higher premiums based on her attained age Bess does not have to prove insurability to convert her individual Term Policy, but she will pay a higher premium because she is older than when she purchased the Term Policy, and because she is converting to a Permanent Policy.

The period of time over which a single sum or periodic deposits grow within an annuity is referred to as the: A Benefit Period B Growth Period C Savings Period D Accumulation Period

D Accumulation Period The pay-in phase of an annuity is called the Accumulation Period or Phase. The pay-out phase is the Annuity Period or Phase.

When a policy lapses due to nonpayment of premium, which nonforfeiture option is the automatic option? A Cash surrender value B Reduced paid-up C Automatic premium loan D Extended term

D Extended term The automatic nonforfeiture option is extended term. Automatic premium loan is a policy provision which must be elected by the policyowner in advance of the policy lapsing.

The term 'mode' refers to the: A Claims process B Rate the underwriters apply to the policy C Method used in policy delivery D Frequency of premium payments

D Frequency of premium payments Mode refers to the frequency of premium payment, such as monthly or annually.

The MIB obtains its information from which of the following? A Producer's agencies B Physicians C Hospitals D Insurers

D Insurers The primary purpose of the Medical Information Bureau (MIB) is to collect adverse medical information about an applicant's health that is known to insurers to which the applicant has previously applied for coverage.

Why have many states prohibited STOLI/IOLI transactions? A The amount the policyowner obtains is too little in relationship to the death benefit B Consumers are not reporting the cash received as taxable income C Mostly the investors are not licensed to conduct such a transaction D It is a violation of the insurable interest rule

D It is a violation of the insurable interest rule The practice of STOLI and IOLI has resulted in fraudulent abuses causing many states to outlaw STOLI and IOLI policies due to a lack of insurable interest.

Which of the following is not a requirement for a person to get a resident producer license in life and health insurance? A Must agree to a criminal background check B Must pass the licensing exam C Must complete a prelicensing course D Must be at least 21 years old

D Must be at least 21 years old A resident producer must be at least 18 years old.

C has a $100,000 traditional whole life insurance policy with a $30,000 cash surrender value. What is the maximum loan C can obtain from the insurer using the policy as collateral for the loan? A $130,000 B $70,000 C $100,000 D $30,000

D. $30,000 The policy can be used as collateral for a loan from the insurance company, but the loan amount is limited to the amount of cash value in the policy.

After receiving a person's written request for cancellation of a policy, an insurer in Minnesota must return all payments made for the policy within how many days? A. 21 B. 5 C. 30 D. 10

D. 10 The insurer must return all payments made for the policy within 10 days after it receives notice of cancellation and the returned policy, and the notice must be modified to notify the purchaser that they are entitled to a refund.

Sam wants to know at what age he should annuitize in order to receive the highest monthly income benefit payment: A. Age 55 B. Age 62 C. Age 65 D. Age 70

D. Age 70 The longer Sam waits to annuitize his annuity, the higher each monthly income benefit payment will be because of the shorter expected payout period.

What is the fastest way to pay up a traditional whole life policy? A. Double up on premium payments B. Borrow against the policy's cash values to pay off any premium balance C. Use the dividend features available D. Buy a single premium policy

D. Buy a single premium policy A single premium life policy only requires one premium payment to be made therefore this would pay up the policy the quickest.

Which of the following provisions commence at the time of the delivery of the policy to the insured? A. Misstatement of Age or Gender B. Suicide Clause C. Insuring Clause D. Free look period

D. Free Look Period The insured/owner has the right to examine the policy for 10 days (this may vary by state) after receipt of delivery. If returned within that period, a full refund of premium is granted. It is the insurer's responsibility to prove date of receipt.

What is the maximum fine the Commissioner may levy against an individual who violates any one law, rule, or order relating to the Commissioner's duties? A $10,000 B $5,000 C $30,000 D $20,000

A $10,000 The Commissioner may fine a person up to $10,000 per violation of any law, rule, or order relating to the Commissioner's dutie

Which Settlement Option pays a specified dollar amount until benefits are exhausted? A Fixed Amount B Life Income C Life Income with Period Certain D Paid-Up Option

A Fixed Amount The Fixed Amount option pays benefits at a specified dollar amount (such as $1,000/month) until the benefits are exhausted.

A The policyowner needs to contact the insurance company and request a change in premium mode Changing the mode of payment is provided for in the contract. A telephone call from the policyowner to the insurance company can effect the change beginning with the next premium due date. in most cases, however, companies will want to receive the request in writing.

Harry and Sally were equal partners in a catering business worth $400,000. They entered into a buy-sell agreement that provided funding whether one of them died or was disabled. The annual premium for each of the disability insurance policies was $2,000. All of the following statements are correct, except: A The premiums are tax deductible B Harry and Sally each own the policy on the other partner C Harry and Sally are each respectively named as the beneficiary on the policy which each of them owns D Harry and Sally would receive the policy benefit, which each would use to buy out the disabled partner, on an income tax free basis

A The premiums are tax deductible The premiums would not be deductible since the non-disabled partner would individually receive the benefit from a disability policy that he or she individually owns.

In Minnesota, a producer submits an insurance application to an insurer, but they are not appointed. What must happen for this transaction to be valid? A The producer must be appointed by that insurer within 15 days B The producer only needs the insurer's permission C This transaction will not be valid because the producer was not appointed D The producer must be representing an insured

A The producer must be appointed by that insurer within 15 days As long as the producer has permission and is appointed within 15 days of the application being submitted, it is permissible for an unappointed producer to represent the insurer. A producer does not represent the insured, only a broker does.

If, as the result of an injury or illness, the insured is deemed to be terminal (i.e., expected to die within 1 or 2 years), what rider added to a life insurance policy would advance a portion of the face value? A Accelerated Benefit (Living Need) B Disability Rider C Viatical Rider D Return of Cash Value Rider

Accelerated Benefit (Living Need) The Accelerated Benefit or Living Need Rider advances a portion of the death benefit to the owner if the insured is diagnosed with a terminal condition (i.e., death expected within 2 years).

Frank, the owner of a life insurance policy, chooses a Settlement Option whereby the proceeds of his policy will be paid out over 20 years. Frank has chosen: A Life Income Period Certain B Fixed Period C Life Income Joint and Survivor D Fixed Amount

B Fixed Period The Fixed Period settlement option pays out proceeds over a specified period of time.

To help protect against experiencing immediate claims, group plans have a(n) _______ period set up by the group sponsor. A Elimination B Probationary C Conversion D Open enrollment

B Probationary A probationary period is set up to help reduce the chance of facing immediate claims.

All of the following are risks to the life settlement purchaser, except: A The insurer becomes insolvent B The insured dies sooner than expected C The insurer will not honor the claim based on lack of insurable interest D The third party runs out of funds to pay on-going premiums

B The insured dies sooner than expected If the insured dies sooner than expected then the purchaser will achieve a greater return than they had planned on.

What happens to a spouse or child rider just prior to it expiring? A They must prove insurability in order to continue on with the rider B The spouse or child has a conversion option C The spouse or child receives a premium refund D The policyowner receives a premium refund

B The spouse or child has a conversion option Both spouse and child riders will also provide a conversion provision permitting the spouse or child to convert to permanent coverage without evidence of insurability prior to the termination of the rider or upon the death of the insured under the basic policy (or upon reaching age of majority for the child covered under a child rider).

The net amount at risk to the insurance company at the endowment date is: A The total of the premiums paid to date B Zero C The cash values D The face amount

B Zero Net amount at risk is the difference between the face amount and cash surrender value. Since the policy endows, there is no spread between them. Therefore, there is no net amount at risk to the insurer.

In Minnesota, an insurer must provide an insured with the approval or denial of a claim within how many days of receiving proof of loss? A. 90 B. 60 C. 15 D. 30

B. 60 An insurer must approve or deny a claim within 60 days of receiving the proof of loss forms. Otherwise, it is considered an unfair claim settlement practice

Joe has a whole life policy with a guaranteed insurability rider. He was 21 at the time the policy was issued. If he exercises all of the options at the ages specified under the typical rider, how many policies will he end up with? A. 6 B. 7 C. 3 D. 2

B. 7 Under the typical guaranteed insurability rider, Joe would have options to buy additional policies of the same type and face amount at ages 25, 28, 31, 34, 37, and 40, therefore he would buy 6 more to bring his total policies owned to 7.

All of the following are characteristics of Ordinary Whole Life Insurance, except: A Premiums remain uniform B If insured lives to age 100, the total amount of premium paid over the lifetime of the insured is returned to the policyowner C Premiums are designed to be paid throughout the life of the insured D The policy pays the face value if the insured dies before age 100

B. If insured lives to age 100, the total amount of premium paid over the lifetime of the insured is returned to the policyowner If the insured lives to age 100, the face amount of the policy is paid to the owner of the policy. At age 100 the cash value equals the face value.

Violating a written order concerning an examination from the Division of Commerce has a maximum fine of: A $5,000 B $2,500 C $10,000 D $1,000

C $10,000 Any person who violates or aids in the violation of a written order pursuant to an examination of an insurance company may be fines up to $10,000 for each day the violation continues.

A typical life insurance application contains how many parts? A 3 B 1 C 2 D 4

C 2 A typical life insurance application contains two parts, part 1 is general information and part 2 is medical information.

The cost of any required medical exams in the underwriting process is paid by the: A Applicant B Insured C Insurer D Producer

C Insurer

In Minnesota, the prospective purchaser of a life settlement must determine all of the following before the purchase, except: A The insured did not undergo a life expectancy evaluation within 18 months before the policy was issued B There was no prior agreement allowing anyone else to assume ownership of the policy C The policy has been in force less than 4 years D The premiums were paid by the insured's personal assets or a person closely related to the insured

C The policy has been in force less than 4 years A policy cannot be sold within 4 years after being issued. If the policy has been in force less than 4 years, the life settlement transaction will be presumed to be a STOLI practice and will be a prohibited life settlement transaction.

Who retains all of the rights in a life insurance policy? A The beneficiary B The insured C The policyowner D The insurer

C The policyowner The Policyowner retains all rights in the policy.

In Minnesota, an unauthorized individual sold an insurance policy on behalf of an insurer. If the insured suffers a loss, who is liable? A The insurance company B The insured C The unauthorized individual D A court must determine liability

C The unauthorized individual Any unauthorized person who participates in the sale of insurance for or on behalf of an insurer is personally liable for any loss the insured sustains. The unauthorized person is also liable for all premiums paid by the insured.

A producer has been unfairly charging higher rates for individuals from a certain residential area. If this unfair trade practice is discovered by the Commissioner, what is the maximum fine the producer can receive? A $500 B $200 C $5,000 D $1,000

D $1,000

A $100,000 policy with a waiver of premium rider and $30,000 of cash value is in force when the insured dies at age 65. The beneficiary receives how much of the policy's values? A $130,000 B $70,000 C 30,000 D $100,000

D $100,000 Only the face amount is paid out to the beneficiary.

An agent in Minnesota who let their license lapse 18 months ago must do all of the following to reinstate their license, except: A Complete continuing education requirements B Pay the penalty fee C Pass an exam D Attend a hearing with the Commissioner

D Attend a hearing with the Commissioner An agent does not need to attend a hearing with the Commissioner in order to reinstate their lapsed license.

Variable Universal Life should only be sold to those clients who are: A Very conservative B Looking for guarantees C First time investors D More investment savvy

D More investment savvy VUL is appropriate for those who are seasoned investors who understand investment risk and are willing and can afford to take it.

For the most part, the highest authority for insurance regulation is: A The National Association of Insurance Commissioners (NAIC) B The Interstate Commerce Commission (ICC) C The Federal Trade Commission (FTC) D The individual states

D The individual states States have the authority to regulate insurance without interference from federal regulation, unless federal law specifically provides otherwise.

Each of the following pertaining to group life insurance is true, except: A. The group sponsor receives a Master Policy B. Group life insurance is term insurance C. The insured receives a Certificate of insurance D. Group members are required to prove insurability

D. Group members are required to prove insurability The primary benefit of group coverage is that proof of insurability on the part of the group participant is not required.

Which of the following products provides an immediate lump sum in the event of premature death? A. Social Security B. Disability Insurance C. Annuity D. Life Insurance

D. Life Insurance Of these options, only life insurance provides an immediate lump sum upon death.

Which of the following would always be considered a Modified Endowment Contract? A. Variable Whole Life B. Straight or Continuous Pay Whole Life C. Limited Pay Whole Life D. Single Premium whole life

D. Single Premium Whole Life Single Premium Whole Life would always be a MEC as it would always fail the 7-Pay Test.

If an insurer in Minnesota determines a policy's premium by an audit, how many days before the policy's expiration must the insurer request the necessary facts from the insured? A. 90 B. 15 C. 60 D. 3

The insurer must request the necessary information at least 60 days before the policy expires.

Which of the following is NOT a common rating classification? A Standard B Preferred C Substandard D Subrated

The three classifications for risks are standard, preferred and substandard.

All of the following are Dividend Options, except: A Cash B Extended term C Paid-up additions D One-year term

B Extended term Extended term is a nonforfeiture option, not a dividend option.

The Commissioner has found a producer guilty of rebating. What is the maximum fine the Commissioner can place on the producer? A $200 B $1,000 C $500 D $100

A $200 A producer found guilty of rebating may be punished by a fine up to $200.

The Guaranty Association for life and health insurance will pay up to all of the following claims except: A $500,000 for net cash surrender values and withdrawals B $410,000 for the present value of a structured settlement annuity C $500,000 for health insurance benefits and net cash surrender values D $250,000 for the present value of annuity benefits including net cash surrender and net cash withdrawal values

A $500,000 for net cash surrender values and withdrawals If the insurer in insolvent, the Association will pay a maximum of $500,000 for all policies issued on one life by the same insurer, and up to $500,000 in life benefits and $130,000 in net cash surrender values and withdrawal values for life insurance.

If Jon dies with an outstanding policy loan of $10,000 on his $100,000 interest-sensitive whole life policy that has $15,000 of cash value, what will his beneficiary receive at the time of claim? A $90,000 B $105,000 C $100,000 D $115,000

A $90,000 Cash values are NOT added onto the death benefit, but outstanding policy loans ARE recovered before the death benefit is paid out. The correct calculation is $100,000 - $10,000 outstanding loan = $90,000

In Minnesota, once an oral agreement for a binder has been made, how many days does a producer have to execute the binder? A 5 days B 10 days C 30 days D 15 days

A 5 days A producer must execute the oral agreement to the insured within 5 business days.

Which of the following is an example of an appropriate advertisement in Minnesota? A A producer gives a public seminar, handing out descriptive literature that clearly identifies the agency B A producer describes the exclusions of a policy in a deceptively positive manner C A producer tells an individual that their agency is endorsed by a government program D A producer gives an individual a pamphlet describing the Loss of Time benefit as unlimited

A A producer gives a public seminar, handing out descriptive literature that clearly identifies the agency An advertisement may provide descriptive literature and sales material in a public presentation as long as all advertisements following the marketing standards, clearly identify the agency, and does not present any information in a misleading manner.

Which of the following is false about a Minnesota nonresident producer? A A producer licensed in another state who applies for a license within 120 days after moving to Minnesota is exempt from prelicensing education and exam requirements B The nonresident producer must submit the required application and fee C The nonresident producer must hold a resident license in good standing in the home state D The home state of a nonresident producer must be on a reciprocal basis with Minnesota

A A producer licensed in another state who applies for a license within 120 days after moving to Minnesota is exempt from prelicensing education and exam requirements A producer licensed in another state who applies for a license within 90 days after moving to Minnesota is exempt from prelicensing education and exam requirements for the line of authority held in the prior state.

Alice is the insured, Bill is the primary beneficiary, and Claire is the contingent beneficiary. Bill dies, then Claire dies, then Alice dies, so who receives the policy proceeds? A Alice's estate B Bill C Claire D The treasury of the state where Alice live

A Alice's estate With no surviving beneficiaries, the policy proceeds go to Alice's estate.

An insurer which is formed under the laws of another country is a(n): A Alien insurer B Domestic insurer C Unauthorized insurer D Foreign insurer

A Alien insurer An insurer that is incorporated or organized in another country is called a alien insurer.

With a Life Income Payment Option, what happens at the annuitant's death? A All payments cease B Payments continue until the principal is paid out C The estate is paid the total remaining balance D The beneficiary starts receiving benefits

A All payments cease Because all payments cease upon the annuitant's death, the amounts of the monthly income payments under this option are larger than under any other option.

All of the following are true about riders, except: A All riders are available free of charge and can be added at anytime without proof of insurability B Once a rider drops from the policy, the additional premium will also drop C Riders added after the policy has been issued usually require evidence of insurability D Most riders are added at the time of policy issue

A All riders are available free of charge and can be added at anytime without proof of insurability Most riders have a charge associated with them and can require providing proof of insurability after the policy has been issued.

Writing a false recommendation for an insured is an example of which unfair trade practice? A Forgery B Rebating C Misrepresentation D False advertising

A Forgery Writing a false recommendation, or create any false document pertaining to insurance, is forgery.

All of the following are true regarding an Attending Physician's Statement (APS), except: A An MIB report can be used in place of an APS B The insurer pays the physician for completing and forwarding the APS C Applicants must sign a release in order for their physician to respond to an APS request D They are used in cases where the application or medical records reveal conditions that require further explanation

A An MIB report can be used in place of an APS An Attending Physician's Statement (APS) is used in cases in which the individual application and/or medical reports reveal conditions for which more information is required. An applicant must sign a written release to enable a release of the APS. The insurer pays for this.

An insurer that is authorized to do business in this state MUST be _____. A An admitted insurer B An alien insurer C A foreign insurer D A domestic insurer

A An admitted insurer "Admitted" only means the insurer is authorized to do business in this state. Admittance is not the same as domicile. Admitted insurers might have domestic, foreign, or alien domicile.

Dividends if declared are paid __________. A Annually B Semi-annually C Monthly D Quarterly

A Annually Unlike corporate stock which pays dividends typically on a quarterly basis policy dividends if declared are paid out on an annual basis

The MIB is used in the underwriting of all of the following types of insurance, except: A Auto and Homeowners B Critical Illness C Disability Income D Life

A Auto and Homeowners The MIB's Underwriting Services are used exclusively by MIB-member life and health insurance companies to assess an individual's risk and eligibility during the underwriting of life, health, disability income, critical illness, and long-term care insurance policies.

If a beneficiary is designated as irrevocable, then all of the following require the irrevocable beneficiary's approval, except: A Changing the mode of premium B Reducing the coverage C Policy assignment D Taking a policy loan

A Changing the mode of premium The policyowner may not change an irrevocable beneficiary unless the beneficiary dies or provides written consent for the change. If an irrevocable beneficiary is named, the owner may not make changes to the policy that affect the coverage or benefits without consent of the beneficiary.

The bank may require its borrowers to have a life insurance policy to secure a loan in the event of the borrower's death. Which provision gives the bank proportional protection but not control of the policy? A Collateral Assignment B Entire Contract Clause C Policy Loan Provision D Consideration Clause

A Collateral Assignment Under the law, an assignment is a transfer of a right to another person or entity of rights by the owner of such rights. Collateral Assignment simply creates a lien against the death benefit but does not affect the owner's rights.

Upon receipt of all of the necessary information, the home office underwriters can issue the coverage applied for in all of the following ways, except: A Declined B Standard C Substandard D Preferred

A Declined Declined means that the policy would not be issued. The other choices indicate an acceptable risk at different pricing based on insurability.

In order to charge a service fee on a contract, a producer in Minnesota must do which of the following? A Disclose in writing that the fee is in addition to the premium B Create an oral agreement with the applicant C Service fees on contracts are not allowed D Negotiate the fee directly with the insurer

A Disclose in writing that the fee is in addition to the premium A producer may charge a service fee on a contract if the services and fee amounts are disclosed in writing, and that the fees are in addition to the premium.

In a policy summary all of the following must be shown as being guaranteed, except: A Dividends B Cash values C Interest rates D Premiums

A Dividends Dividends are never guaranteed.

Annuity income benefit payments are based on all of the following, except: A Education level B Gender C Settlement option selected D Age

A Education level Age, gender, settlement option selected, and dollar amount used to purchase the income payment benefit are all used in determining the amount of the income benefit payment.

After the first licensing term, when does an agent's license expire in Minnesota? A Every 24 months on the last day of the licensee's birth month B Every 12 months on the license anniversary date C Every 24 months on the licensee's birthday D Every 24 months on the license anniversary date

A Every 24 months on the last day of the licensee's birth month After the first licensing term, an agent's license will expire on the last day of their birth month every 2 years.

After the first licensing term, when does an agent's license expire in Minnesota? A Every 24 months on the last day of the licensee's birth month B Every 24 months on the licensee's birthday C Every 24 months on the license anniversary date D Every 12 months on the license anniversary date

A Every 24 months on the last day of the licensee's birth month After the first licensing term, an agent's license will expire on the last day of their birth month every 2 years.

An insured has a $175,000 permanent life insurance policy and is having difficulty keeping up with the premium payments. Which Nonforfeiture Option would allow him to forego the premiums and retain the same face amount until the cash surrender value is exhausted? A Extended Term B Cash Surrender C Reduced Paid-Up D Premium Reduction

A Extended Term Cash Surrender is a Nonforfeiture Option that terminates the policy. Extended Term continues the same coverage until the cash value from which the premium is paid is exhausted.

All of the following are Dividend Options, except: A Extended term B Cash C One-year term D Paid-up additions

A Extended term Extended term is a nonforfeiture option, not a dividend option.

Which of the following is FALSE about the Automatic Premium Loan Provision (APL)? A For it to be included in the policy, there is an additional premium charge B It is only available on cash value policies C The APL is treated like any other policy loan D It is designed to prevent unintentional policy lapse

A For it to be included in the policy, there is an additional premium charge The Automatic Premium Loan provision automatically becomes effective at the end of the grace period to prevent the policy from lapsing. There is no charge for having this provision in a cash value policy.

During the application process, a mistake is made by the applicant in answering one of the health questions and needs to be corrected. What is the best way to go about this? A Have the applicant initial the change or start over with a completely new application B Submit the application as is and see if the insurance company catches the mistake C The producer should simply make a note in the agent report section of the application describing the error and what the true response was supposed to be D The licensed producer has the applicant's implied authority to make any necessary changes to the application on the applicant's behalf

A Have the applicant initial the change or start over with a completely new application The easiest and most practical method would be for the applicant to initial any change; however, some insurers might prefer an entirely new application be completed.

Which of the following is true about the termination of an insurance license in Minnesota? A If a license has been revoked, the producer may not reapply earlier than 2 years from the revocation date B The Commissioner can suspend a license or impose a fine, but not both C A suspended license must be destroyed by the licensee upon notification from the Commissioner D The Commissioner may fine a person up to $1,000 for violating an insurance law

A If a license has been revoked, the producer may not reapply earlier than 2 years from the revocation date The Commissioner can suspend a license and impose a fine up to $10,000 per violation, and upon suspension the license must be delivered to the Commissioner.

All of the following are characteristics of Ordinary Whole Life Insurance, except: A If insured lives to age 100, the total amount of premium paid over the lifetime of the insured is returned to the policyowner B Premiums remain uniform C Premiums are designed to be paid throughout the life of the insured D The policy pays the face value if the insured dies before age 100

A If insured lives to age 100, the total amount of premium paid over the lifetime of the insured is returned to the policyowner If the insured lives to age 100, the face amount of the policy is paid to the owner of the policy. At age 100 the cash value equals the face value.

A Tertiary Beneficiary is the person who receives a death benefit payment in which of the following scenarios? A If the primary and contingent beneficiary die prior to the insured B If the Contingent Beneficiary dies before the insured C If the Primary Beneficiary dies before the insured D If the insured dies before the Primary Beneficiary

A If the primary and contingent beneficiary die prior to the insured The Tertiary Beneficiary is the beneficiary last in order to receive a death benefit, and is sometimes the decedent's estate by default. This 'third beneficiary' is in line behind the primary and contingent beneficiaries.

A STOLI/IOLI transaction is best defined as which of the following? A Inducing insureds who do not need and cannot afford life insurance to buy a policy and sell it for cash B Beneficiaries choosing one of the settlement options the policy provides C Electing a settlement option for the beneficiaries at time of application D Beneficiaries selling the annuitized benefit they are receiving for immediate cash

A Inducing insureds who do not need and cannot afford life insurance to buy a policy and sell it for cash Investors, producers, or brokers with absolutely no personal or business connection with a person, who induce a purchase of a life insurance policy with the sole intent of selling that policy to institutional investors for an amount less than the death benefit, but greater than the policy's cash value is a STOLI/IOLI transaction.

The annuity benefit or payment option requiring the greatest amount of capital per $1,000 of benefit is: A Life Income Joint and Survivor 100% B Life Income Joint and Survivor 66 2/3% C Life Income Joint and Survivor 75% D Life Income Joint and Survivor 50%

A Life Income Joint and Survivor 100% The income benefit requiring the greatest amount of capital per $1,000 of benefit is Life Income Joint and Survivor 100%. The higher the percentage of payment for the survivor (1/2, 2/3), the greater amount of capital that is needed.

Which of the following is NOT a taxable event for a Modified Endowment Contract (MEC)? A Lump sum death benefit paid to the beneficiary B Taking out a policy loan C Withdrawal of cash value to pay for a daughter's wedding D Cash surrender of the policy

A Lump sum death benefit paid to the beneficiary Withdrawal of any cash value to pay for a daughter's wedding, policy loans, and cash surrender of the policy are all taxable distributions. Lump-sum death benefits are considered to be tax-free life insurance proceeds.

The unfair trade practice of defamation can be defined as: A Making a false statement about an insurer's financial condition intended to injure a person engaged in the insurance business B Misrepresenting the true nature of a policy C Filing false statements with any public official D Publishing any misleading statement about the business of insurance

A Making a false statement about an insurer's financial condition intended to injure a person engaged in the insurance business Defamation is defined as making, encouraging the making, or abetting by any means an oral or written statement about an insurer's financial condition that is false, maliciously critical, or derogatory, and is intended to injure any person engaged in the business of insurance

The difference between a misrepresentation and a material misrepresentation is: A Material misrepresentations are issues that affect policy issuance B Material misrepresentations are considered insurance fraud C A material misrepresentation is grounds for criminal charges D A material misrepresentation is always intentional

A Material misrepresentations are issues that affect policy issuance A misrepresentation is any false or misleading statement made by the applicant on the application. A material misrepresentation is a false or misleading statement that would have affected whether the policy was issued at all, and may void the policy.

Which of the following is not a requirement for a person to get a resident producer license in life and health insurance? A Must be at least 21 years old B Must agree to a criminal background check C Must pass the licensing exam D Must complete a prelicensing course

A Must be at least 21 years old A resident producer must be at least 18 years old.

A _______ Option protects the policyowner against total loss of benefits in the event of a lapsed policy. A Nonforfeiture B Settlement C Spendthrift D Dividend

A Nonforfeiture Nonforfeiture Options are found in life insurance policies that generate a cash value, and protect the owner against total loss of that cash value, if the policy should lapse or is cancelled.

If it is known or should be known by the agent that an existing policy is going to be lapsed, forfeited, surrendered or terminated in favor of a new policy, the agent must submit a: A Notice Regarding Replacement B Cancellation of Service C Statement of Release D Notice Regarding Conservation

A Notice Regarding Replacement Replacement rules require a Notice Regarding Replacement.

Which of the following is not a true characteristic of permanent protection Whole Life? A Premiums are flexible B Premiums are payable to age 100 in older policies, and to age 121 in newer policies C The insurer bears all risk D Death benefit typically remains level

A Premiums are flexible Flexible premiums are not a characteristic of a Whole Life Insurance Policy.

Which of the following is the proper sequence of beneficiaries? A Primary, contingent, tertiary B Estate, contingent, primary C Primary, estate, tertiary D Primary, tertiary, contingent

A Primary, contingent, tertiary The question asks for the proper succession of beneficiaries, which is primary, contingent, and tertiary

Which of the following is not a factor in premium determination? A Reserves B Expenses C Mortality D Interest

A Reserves Premiums are based on expected mortality, interest, and expenses.

Lorraine's position has been terminated, and she is interested in converting her group life coverage to an individual policy. In the process, she will find all of the following to be TRUE, except: A She will be converting her group term benefit to an individual term benefit B The premium will be higher than the group premium C She has 31 days of eligibility to convert to the private plan without having to prove insurability D If she waits until the eligibility period has closed, the insurer may require evidence of insurability to reduce adverse selection

A She will be converting her group term benefit to an individual term benefit She will be converting her group term life to an individual permanent policy.

A producer's license has been suspended for violating Minnesota's insurance laws. What is the first action the producer should take? A Surrender the license to the Commissioner B Obtain a performance bond C Reapply for a new license D Request a hearing

A Surrender the license to the Commissioner Once a license has been suspended, the licensee must immediately deliver their license to the Commissioner. They may not reapply for a new license for 2 years, and must obtain a $20,000 performance bond if the Commissioner accepts their application for a new license. The licensee may request a hearing, but this happens after surrendering the license to the Commissioner.

Which of the following would have the lowest first-year annual premium for a 30-year-old, all other factors being equal? A Term to age 40 B Term to age 70 C Term to age 50 D Term to age 60

A Term to age 40 10 years of coverage is less costly than longer terms of coverage.

John is the insured. His wife Mary is the primary beneficiary. Their three children are the contingent beneficiaries. John and Mary are killed in a common accident. The proceeds of John's policy would be paid to: A The children B Mary's estate C John's estate D John's parents

A The children Contingent beneficiaries receive the policy proceeds in the absence of the primary beneficiary. The common disaster clause assumes the primary beneficiary died before the insured if both are killed in the same accident.

Q has a $100,000 Accidental Death & Dismemberment policy. Following Q's accidental death, the insurer learns Q's actual age was different than the age recorded on the application. What is the effect of this discovery? A The death benefit is paid, but adjusted to what premiums paid would have bought using the correct age B The policy is void since the insured made a misstatement C The death benefit is paid since the producer is responsible for the accuracy of the application D The additional premium will be deducted from the death benefit

A The death benefit is paid, but adjusted to what premiums paid would have bought using the correct age The Misstatement of Age or Sex Provision prevents the policy from automatically being voided, but protects the insurer's right to adjust the death benefit based on what the actual premiums paid would have purchased had the correct age been known.

An individual dies 15 days after being terminated from their employment. If their employer provided a group life insurance policy to all employees, what happens to the individual's death benefits? A The death benefits would be paid under the group policy B The insurer may choose to provide $1,000 to any person they deem entitled C The individual would have no death benefit because they died after their employment ended D No benefit is paid unless the individual applied to convert their group policy to an individual policy

A The death benefits would be paid under the group policy Whether or not the individual elected conversion or continuation, death benefits are paid under the group policy if the individual dies within the 31-day day period after termination.

Assignment is _______________. A The transfer of all or part of the ownership in a life insurance policy B What the producer is asked to do prior to submitting the application for underwriting C What the applicant is asked to do when completing the application D What the insured is asked to do during the underwriting process

A The transfer of all or part of the ownership in a life insurance policy Assignment is the transfer of ownership.

If an applicant is a minor, who signs the application? A Their guardian B Any adult C The producer D A probate court judge

A Their guardian If the applicant is a minor, a guardian must sign the application.

To be fully insured for Social Security, generally a person must have worked and paid into the Social Security system for a minimum of ______ years. A. 10 B. 40 C. 20 D. 30

A. 10 To be fully insured for Social Security, the requirement is to accumulate 40 credits or 10 years of work paying social security taxes. A maximum of four credits may be earned in one calendar year of employment.

After a life insurance policy has been in force for more than _____ years the policy is considered incontestable. A. 2 B. 1 C. 4 D. 3

A. 2 Typically the incontestable period runs 2 years from policy issuance.

An insured who resides in Minnesota submitted a claim to their insurance company 10 days ago. How many days does the company have left to acknowledge receiving the claim before it is considered an unfair claims settlement practice? A. 20 B. 5 C. 50 D. 30

A. 20 In this instance, the insurer has 20 more days to acknowledge the receipt of the claim. If an insurer takes more than 30 days to acknowledge they have received a claim, it is an unfair claims settlement practice.

A. 60 The insurer must request the necessary information at least 60 days before the policy expires.

B $1,000 The maximum fine for a producer who uses unfair discrimination is $1,000. Unfair discrimination is considered a gross misdemeanor, and is grounds for the Commissioner to revoke a producer's license.

K has a $100,000 traditional whole life policy with $30,000 of cash values and a $10,000 loan outstanding. What is the maximum additional amount she could borrow from the policy at this time? A $40,000 B $20,000 C $60,000 D $30,000

B $20,000 She can borrow up to the policy's cash value. She already has a loan of $10,000, so she could borrow another $20,000 at this time

Albert owned a $100,000 policy that had accumulated a cash value of $20,000, against which he had borrowed $10,000. If he dies with this loan outstanding, his beneficiary will receive which of the following amounts? A $80,000 B $90,000 C $110,000 D $120,000

B $90,000 Any outstanding loans at the insured's death will be deducted from the face amount (death benefit) along with any interest du

In Minnesota, consumer records collected for a producer to make a recommendation must be maintained for how many years? A 3 B 10 C 5 D 6

B 10 Consumer records and information collected for a producer to make a recommendation must be maintained for 10 years after the insurance transaction is completed by the insurer.

Which of the following traditional whole life policies has the highest first-year annual premium, all other factors being equal? A 40-pay life B 10-pay life C 30-pay life D 20-pay life

B 10-pay life The shorter the premium paying period, the higher the premium. A Limited Pay Life policy of 10 years would have a higher premium than a 20-pay, 30-pay, or 40-pay life policy.

In Minnesota, an insurer must provide an insured with the approval or denial of a claim within how many days of receiving proof of loss? A 90 B 60 C 30 D 15

B 60 An insurer must approve or deny a claim within 60 days of receiving the proof of loss forms. Otherwise, it is considered an unfair claim settlement practice

If an insurer in Minnesota determines a policy's premium by an audit, how many days before the policy's expiration must the insurer request the necessary facts from the insured? A 15 B 60 C 90 D 30

B 60 The insurer must request the necessary information at least 60 days before the policy expires.

In Minnesota, each licensed person must complete at least ______ of initial training course on Long-Term Care policies in order to sell LTC insurance. A 3 hours B 8 hours C 10 hours D 6 hours

B 8 hours In addition to the initial 8-hour training course, the licensed person must complete at least 4 hours of ongoing LTC training every licensing period.

A partial withdrawal is considered ______________. A A policy loan B A partial surrender of the policy C A one-time event D A temporary event

B A partial surrender of the policy A partial withdrawal is considered a partial surrender of the policy.

A producer must include their name and address on which of the following? A A buyer's guide B A policy summary C Any policy amendment or rider D An insurance policy's cover page

B A policy summary Only a policy summary requires that the producer disclose their name and address.

A life insurance applicant's answers on the application indicate that they in good health. In fact, the applicant actually has a disease that they are not aware of. The statement on the application is considered: A Fraudulent B A representation C A warranty D A concealment

B A representation Representations are statements which are 'true and complete to the best of one's knowledge.' Warranties are statements that are guaranteed to be true. Concealment occurs when known information is not communicated.

To purchase the greatest amount of coverage, for the least amount of initial premium, a client would purchase which of the following? A An ordinary life policy B A term policy C A variable life policy D A participating policy

B A term policy A person at any given age, for a specified dollar amount of premium, can always own more term insurance than any other class of life insurance, because all they are purchasing is a death benefit (protection) for a temporary period of time

Which of the following is not within in the power of the Commissioner of Commerce? A Hold hearings B Create the state insurance statutes C Subpoena witnesses D Enforce statutes regarding agent commissions

B Create the state insurance statutes The state legislature creates and passes insurance laws, and the Commissioner is responsible for enforcing the insurance laws. The Commissioner is not involved in writing statutes.

How is a life settlement transaction similar to a viatical settlement transaction? A The insured is terminally ill B A third party buys a life insurance policy for less than its face amount C The policy is overfunded D The policy is about to lapse

B A third party buys a life insurance policy for less than its face amount A Life Settlement is similar to a viatical settlement in that it is the sale of an existing life insurance policy to a third party for more than its cash surrender value, but less than its death benefit. There is no requirement for the insured to be terminally ill in order for a life settlement to occur. A policyowner may choose to sell their policy because the premiums are too high or they want to purchase a different policy. Note: If your state has particular Viatical or Life Settlement licensing and solicitation laws, they will be addressed in the state law chapter.

An insurer which is formed under the laws of another country is a(n): A Unauthorized insurer B Alien insurer C Foreign insurer D Domestic insurer

B Alien insurer An insurer that is incorporated or organized in another country is called a alien insurer.

What will cause the time period of the fixed amount settlement option to be extended? A Lower mortality B An increase in interest credited C A stock market rally D A decrease in the insurer's expenses

B An increase in interest credited Fixed Amount Payments are for a specified dollar amount paid monthly until the benefits along with interest are exhausted. An increase in declared interest will extend the time period in which the benefits are paid.

Which of the following best describes the return of premium rider? A A benefit similar to waiver of premium, but is free of charge B An increasing term benefit that matches the cumulative premiums paid C An increasing term benefit that matches the cash value accumulation D A level term rider in the amount of 20 annual premiums

B An increasing term benefit that matches the cumulative premiums paid The return of premium rider is an increasing term policy which allows the insurer to pay out the policy's death benefit plus the cumulative premiums paid.

For which of the following reasons may an insured return the policy for a full refund within the Free Look Period? A Death of the agent B Any reason C Increase in premium D Decline in financial rating of the insurance company

B Any reason The insured/owner has the right to examine the policy for 10 days after delivery. If returned within that period, a full refund of premium is granted. It is the insurer's responsibility to prove the date of delivery.

The person who submits an application for insurance is always referred to as the _______. A Beneficiary B Applicant C Insured D Owner

B Applicant The person who submits an application for insurance is always referred to as the applicant.

Insurable interest for life insurance is necessary only at the time of: A Policy renewal B Application C Death D Policy delivery

B Application In Life and Health Insurance, insurable interest must exist at the time of application or policy issuance. It is not required at any later point in time.

In life insurance, which of these is the earliest point in time at which the Buyer's Guide is required? A Delivery B Application C Issuance D Renewal

B Application The Buyer's Guide must either be provided at time of application, or no later than policy delivery

A licensed producer moves from Illinois to Minnesota. What must the producer do in order to become a resident producer in Minnesota? A Take a prelicensing course B Apply for a Minnesota license within 90 days after moving C Be appointed by an agency in Minnesota D Take a Minnesota licensing exam

B Apply for a Minnesota license within 90 days after moving If a nonresident producer moves into Minnesota and wishes to become a resident producer, they must submit an application within 90 days of establishing legal residence. There is no prelicensing, exam, or appointment required to receive a license.

An agent in Minnesota who let their license lapse 18 months ago must do all of the following to reinstate their license, except: A Pay the penalty fee B Attend a hearing with the Commissioner C Complete continuing education requirements D Pass an exam

B Attend a hearing with the Commissioner An agent does not need to attend a hearing with the Commissioner in order to reinstate their lapsed license.

With indexed life, the interest credited to the policy is: A. Equal to the dividends paid on a stock index's underlying securities B Based on a percentage of the increase in a stipulated stock index C Established by the full amount of a stock market advance, including dividends D Declared by the insurer's board of directors

B Based on a percentage of the increase in a stipulated stock index When there is an increase in the specified stock market index, a given percentage of the gain is used to determine the interest credited to the policy

Which of the following best describes a conditional contract? A Written by only one party B Both parties must perform specified duties in order for the contract to be enforceable C Only one party is legally bound to contractual obligations D The exchange of values may be unequal

B Both parties must perform specified duties in order for the contract to be enforceable A conditional contract is one in which both parties must perform certain duties in order for the contract to be enforceable.

A generic brochure developed by the NAIC to provide consumers with descriptions of basic types of life insurance as well as the comparative costs of each is called the _______. A Consumer Information Kit B Buyer's Guide C Policy Summary D Sales Illustration

B Buyer's Guide It is required that prospective life insurance buyers receive the NAIC Buyer's Guide to assist them in their life insurance purchase decision.

In Minnesota, a person may cancel their new insurance policy by returning it _________ following the date of purchase. A Before the 2nd day B By the 10th day C By the end of the week D Within 48 hours

B By the 10th day An insured who purchases a new insurance policy has a 10-day free look period in which they have the right to return the policy and receive a full refund of premium.

The value within a permanent life insurance policy that the policyowner can access through a policy loan or policy surrender is known as the ___________. A Annuity Value B Cash Value C Rider Value D Endowment Value

B Cash Value The policyowner has the right to access the cash value through policy loans or policy surrender.

The ________ is the amount payable to the beneficiary upon death of the insured named in a life insurance policy. A Premium refund B Face amount C Loan value D Cash value

B Face amount The face amount is the death benefit amount payable to the beneficiary upon death of the insured. It is also referred to as the coverage amount

If the policyowner specifies the time over which all settlement option installments are to be paid, he/she has chosen which Settlement Option? A Life with Period Certain B Fixed Period C Fixed Amount D Extended Term

B Fixed Period The key word is time. Any time the policyowner specifies payments to be guaranteed for a specific period regardless of who may receive the payments, the Fixed Period Settlement Option has been chosen.

Annuities may be funded with either a lump sum or a ______ premium basis. A Variable B Flexible C Indexed D Life

B Flexible Contributions made during the accumulation period are made with a lump sum or on either a periodic or a flexible basis depending on contract design.

Misrepresentation is which of the following? A Telling an applicant that the previous insurance company was required to change a policy to comply with a sales practice B Forcing a person to lapse an existing policy by not stating the correct policy terms C Making a false statement about an insurer's financial condition to ruin a person's reputation D Charging a different rate for persons of the same class and risk

B Forcing a person to lapse an existing policy by not stating the correct policy terms Misrepresentation is forcing a person to lapse an existing policy by misstating the terms of the policy. Making a false or derogatory statement about an insurer's financial condition with intent to injure any person engaged in the insurance business is defamation, charging a different rate for the same class and risk is discrimination

Which of the following statements regarding life insurance policy exclusions is TRUE? A The war clause states coverage is provided if death is the result of war B Generally, aviation is excluded, except for fare-paying passengers on a commercial flight C Hazardous occupations are usually covered at a reduced benefit if death is the result of an insured's occupation D The status clause states that coverage is provided to individuals with military status

B Generally, aviation is excluded, except for fare-paying passengers on a commercial flight Without an Aviation Rider on the policy, death as a result of aviation is excluded, except for a fare-paying passenger on regularly scheduled commercial flights.

Which of the following is true about the termination of an insurance license in Minnesota? A A suspended license must be destroyed by the licensee upon notification from the Commissioner B If a license has been revoked, the producer may not reapply earlier than 2 years from the revocation date C The Commissioner may fine a person up to $1,000 for violating an insurance law D The Commissioner can suspend a license or impose a fine, but not both

B If a license has been revoked, the producer may not reapply earlier than 2 years from the revocation date The Commissioner can suspend a license and impose a fine up to $10,000 per violation, and upon suspension the license must be delivered to the Commissioner.

Which of the following is the most accurate definition of misappropriation or conversion of funds? A Misstating death benefits B Improperly withholding the beneficiary's funds C Charging different rates for the same risks D Falsely altering any document relating to private business

B Improperly withholding the beneficiary's funds Misappropriation or conversion of funds is improperly withholding, misappropriating, or converting a policyholder's or beneficiary's money, or engaging in fraudulent, coercive, or dishonest practices.

Which type of term protection has an increasing face value as the insured gets older? A Convertible Term B Increasing Term C Level Term D Renewable Term

B Increasing Term Increasing Term, as its name implies, increases the death benefit on an annual basis. Used primarily as a rider attached to a permanent policy, the annual premium typically stays level.

Which of the following is NOT one of the essential elements of any legal contract? A Competent Parties B Indemnity C Legal Purpose D Offer and Acceptance

B Indemnity The essential elements of a contract are offer and acceptance, consideration, competent parties, and legal purpose.

The ___________ branch is responsible for interpreting and determining the constitutionality of the statutes. A Electoral B Judicial C Legislative D Executive

B Judicial The judicial branch is responsible for interpreting and determining the constitutionality of the statutes.

The proceeds from a _________ plan provide the necessary funds to recruit, hire, and train a replacement employee. A Entity B Key employee C Cross purchase D Group

B Key employee Key employee life insurance plans provide the funds to recruit, hire, and train a replacement employee.

Z is the beneficiary of a life insurance policy. Rather than take a lump sum, Z wanted a lifetime payout. However, Z would feel bad if after he died, residual values were retained by the insurer rather than being paid out. Z should consider which of the following settlement options? A Life with Period Certain B Life Refund C Life Only D Joint Life

B Life Refund With Life Refund, payments are made for the lifetime of the recipient. Upon death, if a recipient has not received an amount equal to the total death benefit, the balance is refunded to the beneficiary, either in a lump sum (cash refund), or in installments (installment refund).

Medical exams are requested in all of the following situations, except: A Insured's advanced age B Low amount of premium C Past health history D High amounts of coverage

B Low amount of premium Medical examinations are usually requested by the insurer after determining if the amount of coverage, age of applicant, or his/her health history warrants the examination. Premium has nothing to do with it.

Which of the following correctly describes the practice of twisting? A Spreading false rumors about another insurer B Misleading an insured to induce them to terminate or exchange an existing policy for a different one C Recommending a new type of coverage to an insured D Offering anything of value that is not already part of the policy as an incentive to purchase insurance

B Misleading an insured to induce them to terminate or exchange an existing policy for a different one Twisting is a type of misrepresentation intended to compel an insured to surrender, lapse, or exchange an existing policy for a different one, often with less coverage.

All of the following are true regarding disclosures at the point of sale and issues relating to AIDS, except: A Insurance companies may refuse to issue a policy to individuals based on positive HIV test results B Much like illegal drugs and nicotine the applicant does not have to provide consent prior to insurer's testing for HIV C Insurers must avoid unfair discrimination between those in the same underwriting class for the risks of AIDS D Insurers must require the maintenance of strict confidentiality of personal information obtained through testing

B Much like illegal drugs and nicotine the applicant does not have to provide consent prior to insurer's testing for HIV Insurers must require informed consent before testing for HIV.

The Spendthrift provision states that the beneficiary: A May elect to receive a lump sum benefit instead of installments B Must receive installments at the times and for the amounts as stated in the policy C Determines the amount of each monthly installment D Selects the settlement option on behalf of the insured

B Must receive installments at the times and for the amounts as stated in the policy When a life policy provides for the payment to the beneficiary, a provision may be added that the beneficiary will have no right under the contract except to receive the installments at such times and in such amounts as stated in the policy. The Spendthrift Clause denies the beneficiary the right to assign their interest in the policy proceeds. The purpose is to prevent creditors of a beneficiary from claiming any benefits payable to the beneficiary before they are actually received. This clause does not protect the beneficiary if the benefits are payable in a lump sum, only when the proceeds are held by the insurance company under a settlement option.

The Spendthrift provision states that the beneficiary: A Selects the settlement option on behalf of the insured B Must receive installments at the times and for the amounts as stated in the policy C May elect to receive a lump sum benefit instead of installments D Determines the amount of each monthly installment

How often must the Commissioner examine the condition of an insurer in Minnesota? A Once every 10 years B Once every 5 years C Once every 6 years D Once every 3 years

B Once every 5 years The Commissioner must examine each insurer at least once every 5 years. However, the Commissioner may examine an insurer more often if they deem it necessary.

___________ in a policy allow the owner to name the beneficiary, choose a dividend option or settlement option, or borrow against the contract. A Insuring Clause B Ownership Provision C Consideration Clause D Incontestable Clause

B Ownership Provision The rights of ownership are a standard contract provision and allows the policyowner to do all of these things and more.

In the event a parent becomes disabled or dies while paying premiums on a life insurance policy for a minor child, which provision would allow the policy to continue in force until the child reaches a predetermined age? A Minor Child Rider B Payor Benefit (Waiver of Payor Premium) C Return of Premium Rider D Cost of Premium Rider

B Payor Benefit (Waiver of Payor Premium) A Payor benefit rider waives the policy premium in the event of the death or total disability of the premium payor. Usually found in policies covering children to the child's age 21 or 25.

All of the following are TRUE regarding qualified plans, except: A Employer contributions are not taxable to the employee until withdrawn B Plans can discriminate in favor of highly compensated employees C Distributions taken prior to age 59 1/2 are subject to tax and a tax penalty D Employer contributions are immediately tax-deductible

B Plans can discriminate in favor of highly compensated employees In an ERISA-qualified plan, there can be no discrimination in favor of highly compensated employees.

The __________ has the right to change the premium mode. A Insured B Policyowner C Revocable beneficiary D Irrevocable beneficiary

B Policyowner The policyowner has the right to change the premium mode.

When an individual qualifies for a lower premium or rate than standard risks, the insured is considered a: A Bad risk B Preferred risk C Substandard risk D Higher risk

B Preferred risk The question defines a preferred risk.

When an applicant does not smoke, exercises regularly, seldom drinks, and eats moderately and is considered to be a better-than-average risk, they would likely qualify for: A Substandard status and pay a higher premium B Preferred status and pay a lower premium C Preferred status and pay a higher premium D Standard status and pay a standard premium

B Preferred status and pay a lower premium Individuals who meet certain requirements (such as ideal health, height and weight, low occupational stress, etc.) are preferred risks.

The cost basis of a life insurance policy is __________. A Cash values plus any outstanding policy loans B Premiums paid less dividends or withdrawals C Cash values in excess of premiums paid D Dividends left on deposit at interest plus the policy's cash values

B Premiums paid less dividends or withdrawals The basis is premiums paid less dividends or withdrawals.

Which of the following is the proper sequence of beneficiaries? A Estate, contingent, primary B Primary, contingent, tertiary C Primary, estate, tertiary D Primary, tertiary, contingent

B Primary, contingent, tertiary The question asks for the proper succession of beneficiaries, which is primary, contingent, and tertiary.

A married couple wants to make sure that if either of them dies, the survivor has enough funds to maintain their standard of living but want to accomplish this in the most economical way. Which of the following recommendations is best suited to accomplish their goal? A Buy a Joint and Survivorship Life Policy B Purchase a Joint life policy C Buy two separate Whole Life policies D Buy two separate Limited payment life policies

B Purchase a Joint life policy Joint Life pays on the death of the first insured. It is less expensive than buying two separate policies.

All of the following are traditional whole life policy nonforfeiture values, except: A Extended term insurance B Renewable and convertible features C Reduced paid-up insurance D Cash surrender values

B Renewable and convertible features The traditional whole life policy builds nonforfeiture values, such as cash surrender values, reduced paid-up insurance, and extended term insurance.

In Minnesota, if a producer is unable to complete their license renewal because of a long-term medical disability, what may they do? A Apply for medical disability B Request a waiver of renewal procedures C Request an extension D Pay the penalty for a lapsed license

B Request a waiver of renewal procedures If a producer is unable to comply with license renewal producers due to extenuating circumstances, such as a long-term medical disability or active military service, they may request a waiver of these procedures, including a waiver for any fine imposed for failing to comply.

Linda wants her husband to be the beneficiary of her life policy but also wants to retain all rights of ownership. Which of the following types of beneficiary designations should she use? A Irrevocable beneficiary B Revocable beneficiary C Contingent beneficiary D Tertiary beneficiary

B Revocable beneficiary By naming her husband as a revocable beneficiary, Linda would retain all rights of ownership. To name her husband irrevocably would give her husband a vested interest in policy benefits.

The owner's rights include all of the following, except: A Name and change beneficiaries B Selection of mortality table to use C Borrowing the cash values D Select dividend paying options on a participating policy

B Selection of mortality table to use The policyowner has the right to name or change revocable beneficiaries, the right to borrow against the cash values or access living values, the right to receive dividends and to select among the dividend options made available, and the right to assign the policy on a collateral basis or an absolute basis, to name a few

In a STOLI/IOLI transaction, what are the insureds basically doing? A Borrowing the necessary funds from a third party in order to acquire the amount of insurance they need B Selling their mortality to another for up-front cash C Overinsuring themselves D Committing a misdemeanor punishable by monetary fine and forfeiture of the policy issued

B Selling their mortality to another for up-front cash The insureds are basically selling their mortality to another for up-front cash.

The annuity __________ option selected can provide a temporary or lifetime payment. A Accumulation B Settlement C Interest D Investment

B Settlement The annuity settlement option selected can provide a temporary or lifetime payment. If a lifetime benefit is selected, in most cases it is an irrevocable election.

If an annuity is purchased in December and monthly benefits begin in January of the following year, what type of annuity is it? A Flexible Premium Tax Sheltered Annuity B Single Premium Immediate Annuity C Variable Retirement Annuity D Single Premium Fixed Annuity

B Single Premium Immediate Annuity The question addresses when the actual receipt of benefits from an annuity begins. When benefits begin within a year of the issue date, this is referred to as 'immediate'.

_____________ are allowed as a way to access annuity values without having to elect a settlement option or surrender the contract. A Premium deferrals B Systematic withdrawals C Contract waivers D Loans

B Systematic withdrawals Systematic withdrawals are allowed as a way to access annuity values without having to elect a settlement option or surrender the contract.

The Guaranty Association's Notice of Policyholder Rights does not include which of the following information? A A warning that the Association may not cover the policy B The Guaranty Association's limits of liability C The producer cannot use the existence of the Association in order to sell the policy D Telephone number of the Association

B The Guaranty Association's limits of liability The producer must give the Association's Notice of Policyholder Rights to an applicant at the time of the policy application and delivery, but the limits provided by the Association in the event the policy's insurer become insolvent are not included in the notice.

Which of the following two documents always constitutes part of the entire contract? A Policy illustration and Agent's Report B The application and policy C Application and Agent's Report D Policy and Attending Physician's Statement

B The application and policy The entire contract is comprised of the policy itself, the application and any riders attached. The Agent's Report and APS are not included.

A universal life policy has a death benefit of $125,000 and a cash accumulation value of $15,000. Generally, what will happen to the policy if there is a $5,000 partial withdrawal? A The policy will be used as collateral for a loan from the insurer for which interest will be charged B The death benefit or cash accumulation will be reduced by the partial withdrawal C The policy will immediately be voided by the insurer D The policy will become paid up

B The death benefit or cash accumulation will be reduced by the partial withdrawal A partial withdrawal also known as a partial surrender will cause the policy to have either the face amount or cash accumulation reduced by the amount of the withdrawal.

An individual dies 15 days after being terminated from their employment. If their employer provided a group life insurance policy to all employees, what happens to the individual's death benefits? A The insurer may choose to provide $1,000 to any person they deem entitled B The death benefits would be paid under the group policy C No benefit is paid unless the individual applied to convert their group policy to an individual policy D The individual would have no death benefit because they died after their employment ended

B The death benefits would be paid under the group policy Whether or not the individual elected conversion or continuation, death benefits are paid under the group policy if the individual dies within the 31-day day period after termination.

All of the following are risks to the life settlement purchaser, except: A The insurer will not honor the claim based on lack of insurable interest B The insured dies sooner than expected C The third party runs out of funds to pay on-going premiums D The insurer becomes insolvent

B The insured dies sooner than expected If the insured dies sooner than expected then the purchaser will achieve a greater return than they had planned on.

When it comes to life insurance, insurable interest on one's own life is: A Based on the number of dependents B Based upon salary C Unlimited D Calculated by the insured's assets

C Unlimited The insurable interest on one's own life is generally regarded as unlimited.

Choose the true statement about the replacement process of life insurance. A The replacing insurer must maintain evidence that all requirements were met when selling a replacement policy for 5 years B The insured must exercise the right to an unconditional refund within 30 days of the policy delivery C Replacement regulations apply to both group and individual life insurance D The replacing insurer must notify the existing insurer of the replacement within 15 days after the replacement policy is issued

B The insured must exercise the right to an unconditional refund within 30 days of the policy delivery The life insurance policy or contract, or a separate written notice must be delivered with the policy that advises the insured of the right to an unconditional refund of all premiums paid as long as the insured exercises this right within 30 days beginning the date of policy delivery

Which of the following is TRUE regarding payment of premium? A Paying the premium semiannually results in greater total cost than paying quarterly B The more frequent the payment, the greater the overall cost C The more frequent the payment, the lower the cost D Paying the premium monthly results in lower total overall cost than paying quarterly

B The more frequent the payment, the greater the overall cost The more frequently the owner pays a premium, the higher the overall cost will be.

In Minnesota, the prospective purchaser of a life settlement must determine all of the following before the purchase, except: A The premiums were paid by the insured's personal assets or a person closely related to the insured B The policy has been in force less than 4 years C The insured did not undergo a life expectancy evaluation within 18 months before the policy was issued D There was no prior agreement allowing anyone else to assume ownership of the policy

B The policy has been in force less than 4 years A policy cannot be sold within 4 years after being issued. If the policy has been in force less than 4 years, the life settlement transaction will be presumed to be a STOLI practice and will be a prohibited life settlement transaction

K meets with an insurance producer, completes an application, and writes a check for the initial premium. The producer submits the application and the premium to the insurer, and a policy is issued and mailed to the producer. Two weeks later, K has still not shown up to pick up the policy. Which of the following statements is correct? A The policy is in force and coverage began when the policy arrived at the producer's office B The policy is in force and was legally delivered when the insurer sent the policy to the producer C The policy is not in force--the policy must be physically handed to K for coverage to begin D The policy is not in force until the insured passes a medical exam, since the policy was not immediately given to the insured

B The policy is in force and was legally delivered when the insurer sent the policy to the producer Since the initial premium has been paid and the policy was issued as applied, legal delivery occurs when the policy is issued by the insurer. It is at this point that a legal contract exists, since the check accompanying the application is the offer, and the issued policy is the acceptance of the offer

All of the following are true of a substandard risk, except: A The insured may have a flat additional premium added to their base premium B The premium would be discounted C The coverage could be reduced for a period of time D The insured may be rated as older than their actual age

B The premium would be discounted Individuals whose risk factors do not measure up to underwriting standards are usually issued rated policies.

Choose the false statement about the expiration of an insurance license. A The producer can reinstate a lapsed license within a year of the due date without passing another exam B The producer has a 31 day grace period after the renewal date to pay the renewal fee C The renewal fee for a lapsed license is twice the unpaid renewal fee D The producer must complete continuing education requirements before the renewal date

B The producer has a 31 day grace period after the renewal date to pay the renewal fee The insurance license will expire on the renewal date if the renewal fee is not received by the due date.

In Minnesota, a producer submits an insurance application to an insurer, but they are not appointed. What must happen for this transaction to be valid? A The producer only needs the insurer's permission B The producer must be appointed by that insurer within 15 days C The producer must be representing an insured D This transaction will not be valid because the producer was not appointed

B The producer must be appointed by that insurer within 15 days As long as the producer has permission and is appointed within 15 days of the application being submitted, it is permissible for an unappointed producer to represent the insurer. A producer does not represent the insured, only a broker does.

Universal Life is similar to Whole Life in all of the following ways, except: A It provides a death benefit B The timing and amount of premium is flexible C Any internal cash value growth is tax-deferred D Cash values accumulate based on premium deposits and interest

B The timing and amount of premium is flexible Like ordinary Whole Life (WL), Universal Life (UL) Insurance features insurance protection and a savings element that grows on a tax-deferred basis. However, UL offers flexible premiums whereas WL does not.

Assignment is _______________. A What the producer is asked to do prior to submitting the application for underwriting B The transfer of all or part of the ownership in a life insurance policy C What the insured is asked to do during the underwriting process D What the applicant is asked to do when completing the application

B The transfer of all or part of the ownership in a life insurance policy Assignment is the transfer of ownership.

The insurer's consideration is __________ while the applicant's consideration is ________. A Hiring and training a producer / Listening to the sales presentation B Their promise to pay the claim / The application and premium payment C Issuing the policy / Submitting the application D Providing claim forms / Submitting proof of death

B Their promise to pay the claim / The application and premium payment The consideration clause states what each party exchanges in the contract. The policyowner must pay something of value (premium) in exchange for the insurer's promise to pay the benefits. Policies are issued in consideration of the application and the payment of premium(s).

In a viatical settlement, a third party purchases a policy from a terminally ill insured for approximately _____ to _____% of the policy's face amount. A 50/70 B 30/50 C 60/80 D 40/60

C 60/80 The viatical settlement provider purchases the policy at 60 to 80% of the face amount, expecting to profit as the new policyowner at the time of claim.

The insurer's consideration is __________ while the applicant's consideration is ________. A Issuing the policy / Submitting the application B Their promise to pay the claim / The application and premium payment C Providing claim forms / Submitting proof of death D Hiring and training a producer / Listening to the sales presentation

Which of the following statements is TRUE regarding Fixed Annuities? A Premiums are allocated to separate account(s) B Upon annuitization, the annuity payments are level C A securities registration (license) is required in order to sell them D The contract owner bears the investment risk

B Upon annuitization, the annuity payments are level Premiums are allocated to the insurer's general account. The insurer has the investment risk, and fixed annuities pay out a fixed level income benefit payment.

In Minnesota, STOLI transactions are: A Policies which are sold within 5 years of purchase B Violations of the Minnesota Insurable Interest Act C Allowed with the insured's written consent D Life settlement contracts

B Violations of the Minnesota Insurable Interest Act Stranger Originated Life Insurance (STOLI) transactions are violations of the Minnesota Insurable Interest Act

In Minnesota, consumer records collected for a producer to make a recommendation must be maintained for how many years? A. 3 B. 10 C. 5 D. 6

B. 10 Consumer records and information collected for a producer to make a recommendation must be maintained for 10 years after the insurance transaction is completed by the insurer.

After receiving a person's written request for cancellation of a policy, an insurer in Minnesota must return all payments made for the policy within how many days? A. 21 B. 10 C. 30 D. 5

B. 10 The insurer must return all payments made for the policy within 10 days after it receives notice of cancellation and the returned policy, and the notice must be modified to notify the purchaser that they are entitled to a refund.

The unfair trade practice of defamation can be defined as: A Misrepresenting the true nature of a policy B Making a false statement about an insurer's financial condition intended to injure a person engaged in the insurance business C Publishing any misleading statement about the business of insurance D Filing false statements with any public official

B. Making a false statement about an insurer's financial condition intended to injure a person engaged in the insurance business Defamation is defined as making, encouraging the making, or abetting by any means an oral or written statement about an insurer's financial condition that is false, maliciously critical, or derogatory, and is intended to injure any person engaged in the business of insurance.

What is the maximum fine the Commissioner may levy against an individual who violates any one law, rule, or order relating to the Commissioner's duties? A $20,000 B $5,000 C $10,000 D $30,000

C $10,000 The Commissioner may fine a person up to $10,000 per violation of any law, rule, or order relating to the Commissioner's duties.

An insurer uses an audit to determine a policy's premium, and requests information from the insured to do so. The audit reveals that the insured provided fraudulent information. If the normal premium is $500, how much is the insured liable for? A $1000 B $2000 C $1500 D $500

C $1500 If an audit reveals that an insured provided fraudulent facts and figures, the insured is liable for 3 times the normal premium.

An insured purchases a 20-Pay Life Policy with a face amount of $25,000 and an annual premium of $1,000. The insured dies 15 years later when the cash value is $5,000. What amount will the beneficiary receive? A $20,000 B $30,000 C $25,000 D $15,000

C $25,000 If death occurs at any point prior to age 100, the beneficiary receives the death benefit of $25,000.

A producer who changes their address must notify the Commissioner within _______ of the change. A 5 days B 24 hours C 10 days D 30 days

C 10 days A producer has 10 days to notify the Commissioner about a change of name or address.

In Minnesota, prelicensing education must include how many hours of education per line of authority? A 30 B 10 C 20 D 25

C 20 Prelicensing education must consist of 20 hours of education per line of authority and must include an introduction to insurance and insurance-related concepts covering any of the major lines of authority.

What is the total amount of continuing education a producer must complete in Minnesota each renewal period? A 21 B 30 C 24 D 20

C 24 Licensees are required to complete 24 hours of continuing education every renewal period (2 years). 3 of the 24 hours must be in Ethics.

How long, typically, is the reinstatement period from policy lapse? A 1 year B Indefinitely C 3 years D 2 years

C 3 years Typically, the reinstatement period is three years, but it can be up to 5 years with some policies or some insurers.

The producer must deliver an insurance policy within how many days after receiving the premium? A 15 days B 21 days C 30 days D 5 days

C 30 days An agent must deliver policies or certificates within 30 working days of receiving the premium, unless the insured agrees in writing that the agent may keep such evidence of insurance

The insurer must notify the Commissioner within __________ after the termination of a producer's appointment is effective. A 10 days B 5 days C 30 days D 24 hours

C 30 days An insurer terminating a producer's appointment must notify the Commissioner, stating the reason, within 30 days after the termination's effective date

Minnesota requires all life insurance policy forms to be submitted for the Commissioner's approval. How long does the Commissioner have to notify the insurer of approval or disapproval? A 2 weeks B 30 days C 60 days D 90 days

C 60 days The Commissioner has 60 days to notify the insurer of the approval or disapproval of life insurance policy forms. If the insurer does not receive communication once the 60 days have passed, the form will be deemed approved.

All of the following are riders that can provide for additional temporary coverage on a new or existing policy, except: A Spouse B Insured C Neighbor D Children

C Neighbor Term riders require that the policyowner have an insurable interest in the person covered under the rider. Neighbors don't qualify.

Which of the following individuals does not have insurable interest in the insured's life policy? A The insured B A person with a substantial and legal interest in the continued life of the insured C A person with an insurable interest at the time the insured dies D A personal representative of the insured's estate

C A person with an insurable interest at the time the insured dies A person has insurable interest only if it existed at the time the policy was issued.

Which of the following is an example of an appropriate advertisement in Minnesota? A A producer describes the exclusions of a policy in a deceptively positive manner B A producer tells an individual that their agency is endorsed by a government program C A producer gives a public seminar, handing out descriptive literature that clearly identifies the agency D A producer gives an individual a pamphlet describing the Loss of Time benefit as unlimited

C A producer gives a public seminar, handing out descriptive literature that clearly identifies the agency An advertisement may provide descriptive literature and sales material in a public presentation as long as all advertisements following the marketing standards, clearly identify the agency, and does not present any information in a misleading manner.

The exception to the rule concerning the non-deductibility of life insurance premiums is: A Life insurance to fund a Buy-Sell Agreement B Key Employee Insurance C All employer paid group life insurance premiums D Third-Party Ownership Policies

C All employer paid group life insurance premiums An employer may deduct 100% of the total group life premium it pays as a business expense, but the value of premiums for any employee's coverage in excess of $50,000 must be 'imputed' to the employee and income tax paid on that amount.

Which of the following is used by an insurer to collect information from the applicant/insured for underwriting purposes? A A receipt B An amendment C An application D A rider

C An application A producer collects field underwriting information from the applicant/insured on an insurance application.

Which of the following beneficiary designations is a class designation? A Mary Smith - spouse B Frank Jones - son C Any children of this marriage D Bank of Springfield - creditor

C Any children of this marriage A class designation is when the beneficiary is not directly identified by name.

For which of the following reasons may an insured return the policy for a full refund within the Free Look Period? A Death of the agent B Decline in financial rating of the insurance company C Any reason D Increase in premium

C Any reason The insured/owner has the right to examine the policy for 10 days after delivery. If returned within that period, a full refund of premium is granted. It is the insurer's responsibility to prove the date of delivery.

In order for a life insurance policy to be valid, insurable interest must exist at time of _________. A Claim B Conversion C Application D Issuance change to expiration

C Application Unlike Property and Casualty insurance, for a life insurance policy to be valid, insurable interest need only exist at the time of application when the policy is issued.

Which provision allows an insurer to borrow from the cash value of a policy in order to pay premiums due and prevent a lapse in coverage? A Reinstatement B Partial Withdrawal C Automatic Premium Loan D Spendthrift

C Automatic Premium Loan The Automatic Premium Loan Provision enables the insurer to borrow automatically from the policy's cash value, at the end of the grace period, to cover a premium payment to prevent the policy from lapsing.

All of the following are nonforfeiture values, except: A Reduced paid-up B Extended term C Automatic premium loan D Cash surrender

C Automatic premium loan Nonforfeiture values go into effect after a policy lapses. The automatic premium loan will keep a policy from lapsing.

Regarding Social Security survivor benefits, when the youngest child reaches age 16, the widow's/widower's _________ period begins and continues until the surviving (non-remarried) spouse reaches age 60. A Elimination B Waiting C Blackout D Probationary

C Blackout When the youngest child reaches age 16, the widow's/widower's blackout period begins.

01:21:22 In Minnesota, a person may cancel their new insurance policy by returning it _________ following the date of purchase. A Within 48 hours B Before the 2nd day C By the 10th day D By the end of the week

C By the 10th day An insured who purchases a new insurance policy has a 10-day free look period in which they have the right to return the policy and receive a full refund of premium.

In Minnesota, a person may cancel their new insurance policy by returning it _________ following the date of purchase. A Within 48 hours B Before the 2nd day C By the 10th day D By the end of the week

C By the 10th day An insured who purchases a new insurance policy has a 10-day free look period in which they have the right to return the policy and receive a full refund of premium.

f a home office underwriter obtains MIB codes inconsistent with information provided on the application, what is the underwriter required to do? A Automatically reject the application and order any premium paid refunded B Issue the policy at a higher premium due to the undisclosed higher risk C Conduct further investigation to obtain more information prior to making a decision D Refer the case to the state Insurance Department for possible insurance fraud

C Conduct further investigation to obtain more information prior to making a decision When the home office underwriter receives MIB codes that are inconsistent with information provided on the application, the underwriter is required to conduct a further investigation to obtain more information prior to making an underwriting decision. Underwriting decisions cannot be based solely on MIB codes since there could be a reasonable explanation for the discrepancy.

Choose the false statement regarding credit life insurance. A Credit insurance is term life insurance issued to a person that owes money B A creditor could be a vendor of services C Credit health insurance coverage must exceed the unpaid balance of the loan by 10% D Group health and disability insurance can be issued to creditors for coverage on a debtor's life

C Credit health insurance coverage must exceed the unpaid balance of the loan by 10% For credit life insurance, the initial amount of insurance cannot exceed the total contract indebtedness plus one month's payment.

When an insurer requires that an insured be subjected to a medical examination, who pays for the medical exam? A The applicant B The insured C The producer D The insurer

D The insurer The insurer pays for any medical exam it orders.

Part 2 of the application consists of all of the following information, except: A Past and present health B Hospitalizations C Date of birth, gender D Surgeries

C Date of birth, gender Part 2 of the application contains questions pertaining to medical background, past and present health, any medical visits, hospitalizations, or surgeries in recent years, medical status of immediate family members, and age and causes of their death.

If an applicant for life insurance misstates his age on the application, what would be the consequence if/when it is discovered? A The policy will be voided B Premiums refunded with interest, no death benefit paid C Death benefit will be what the premium paid would have purchased at issuance at the correct age D Real age divided by actual age, multiplied by death benefit

C Death benefit will be what the premium paid would have purchased at issuance at the correct age The Misstatement of Age or Sex Provision prevents the policy from automatically being voided, but protects the insurer's right to protect its interests by adjusting the death benefit based on what the actual premiums paid would have purchased had the correct age been known.

Choose the false statement about personal solicitation standards for Minnesota insurance producers: A Before personally soliciting a customer, the producer must provide the name of the person making the contact B The fact that the producer is selling insurance must be disclosed in writing before meeting the customer C Disclosure is required in writing if the initial personal contact is made by telephone D A fee may be charged for services rendered if a written disclosure is provided

C Disclosure is required in writing if the initial personal contact is made by telephone Written disclosures are not required if the initial personal solicitation is made by telephone.

_________ refers to the jurisdiction where an insurer was formed or incorporated. A Authorized B Approved C Domicile D Admitted

C Domicile Domicile refers to the jurisdiction either state or country where an insurer was formed or incorporated.

Once issued, if the application is attached to the policy itself, it then becomes part of the ___________. A Insuring Clause B Incontestability Clause C Entire contract D Consideration Clause

C Entire contract To be regarded a part of the contract, the application for insurance must be included with the rest of the policy. It may not be incorporated 'by reference'

Concerning the Paid-Up Additions Dividend Option, all of the following are true, except: A Paid-up additions have their own increasing cash values B Paid-up additions increase the amount of future dividends credited C Eventually, no more premiums will be due on the policy D These single premium additions do not change the face value of the original policy

C Eventually, no more premiums will be due on the policy The Paid-Up Additions purchased under this Option have their own values and do not change the face amount of the original policy. Each additional segment of insurance contains both a death benefit and increasing cash surrender value, and by purchasing paid-up additions, larger dividends may be paid in the future. Paid up additions do not eliminate need to pay premiums on the original policy.

An insured has a $175,000 permanent life insurance policy and is having difficulty keeping up with the premium payments. Which Nonforfeiture Option would allow him to forego the premiums and retain the same face amount until the cash surrender value is exhausted? A Cash Surrender B Reduced Paid-Up C Extended Term D Premium Reduction

C Extended Term Cash Surrender is a Nonforfeiture Option that terminates the policy. Extended Term continues the same coverage until the cash value from which the premium is paid is exhausted.

Insurers that are incorporated in another state, but doing business in this state, are considered: A Alien B Stock C Foreign D Domestic

C Foreign An insurer operating in this state but incorporated in another state is referred to as foreign

An insurer authorized to do business in State A, which was incorporated in State B, is considered what type of insurer in State A? A Stock B Alien C Foreign D Domestic

C Foreign The insurer would be domestic in State B and foreign in State A.

An organization that transacts insurance only with its own members is a(n): A Domestic insurer B Insurance guaranty association C Fraternal Benefit society D Mutual insurer organization

C Fraternal Benefit society A fraternal benefit society is a nonprofit organization formed solely for the benefit of its members and transacts insurance only for its members.

Which of the following is not considered rebating? A Increasing the premium in order to purchase the insurer's stock for the applicant B Providing a long-term client a premium rebate to buy another policy C Giving a policyholder an annual gift of a $25 houseplant D Giving savings bonds to an applicant buying replacement coverage

C Giving a policyholder an annual gift of a $25 houseplant A promotional advertising item of $25 or less or a gift of $25 or less per year is not a rebate if the receipt of the item or gift is not conditioned upon purchase of an insurance policy or product.

If the insured dies while the _______ period is in effect, the death benefit paid is the face amount, minus the premiums due. A Settlement B Reinstatement C Grace D Incontestability

C Grace If the insured dies during the grace period, the death benefit of the policy is payable to the beneficiary, minus any premiums or loans due.

Applicants must consent to be tested and be informed that testing for ________ may determine insurability. A Nicotine B Blood alcohol C HIV D Illegal drugs

C HIV Applicants must consent to be tested for HIV and be informed that testing for HIV may determine insurability.

Which of the following is true about the termination of an insurance license in Minnesota? A The Commissioner may fine a person up to $1,000 for violating an insurance law B A suspended license must be destroyed by the licensee upon notification from the Commissioner C If a license has been revoked, the producer may not reapply earlier than 2 years from the revocation date D The Commissioner can suspend a license or impose a fine, but not both

C If a license has been revoked, the producer may not reapply earlier than 2 years from the revocation date The Commissioner can suspend a license and impose a fine up to $10,000 per violation, and upon suspension the license must be delivered to the Commissioner.

Which of the following correctly describes the effect of the Common Disaster Clause? A If an insured and contingent beneficiary both die in a train wreck, it is presumed that the insured died first in order to protect the primary beneficiary's right to claim the death benefit B If the primary and contingent beneficiary die when the boat they were sailing in sinks, it is presumed that the primary beneficiary outlived the contingent beneficiary for claims paying purposes C If an insured and primary beneficiary both are killed when the bus they are riding in goes over a cliff and if it cannot be determined who died first, the insured or primary beneficiary, the insured will be presumed to have survived the primary beneficiary so the contingent beneficiary will be able to receive the death proceeds D If the insured and primary beneficiary are killed in an auto accident in which both were in the car at the time of the crash, an autopsy will be required in order to determine which passenger died first

C If an insured and primary beneficiary both are killed when the bus they are riding in goes over a cliff and if it cannot be determined who died first, the insured or primary beneficiary, the insured will be presumed to have survived the primary beneficiary so the contingent beneficiary will be able to receive the death proceeds The purpose of the Common Disaster Clause is to establish that, if it cannot be determined whether the insured or the primary beneficiary died first in a common disaster, the insured will be presumed to have survived the primary beneficiary and the proceeds of the policy will be paid to the contingent beneficiary, or if none is named, then to the estate of the insured.

According to Minnesota's Agent Conduct regulations, a producer must hold client funds in what specific way? A In their personal account B With trustworthy intent C In a fiduciary capacity D With integrity

C In a fiduciary capacity Producers must hold client funds in a fiduciary capacity.

Life insurance benefits are usually paid ____________, unless another mode of settlement has been selected. A Until the beneficiary dies B In specified amounts over time C In a lump sum D In installments over a specified period of time

C In a lump sum Life insurance benefits are usually paid in a lump sum, unless another mode of settlement has been selected.

A STOLI/IOLI transaction is best defined as which of the following? A Electing a settlement option for the beneficiaries at time of application B Beneficiaries selling the annuitized benefit they are receiving for immediate cash C Inducing insureds who do not need and cannot afford life insurance to buy a policy and sell it for cash D Beneficiaries choosing one of the settlement options the policy

C Inducing insureds who do not need and cannot afford life insurance to buy a policy and sell it for cash Investors, producers, or brokers with absolutely no personal or business connection with a person, who induce a purchase of a life insurance policy with the sole intent of selling that policy to institutional investors for an amount less than the death benefit, but greater than the policy's cash value is a STOLI/IOLI transaction.

Which of the following manufactures and sells insurance coverage in the form of insurance policies or contracts of insurance? A Insurance agencies B Insurance agents C Insurance companies D Applicants/insureds

C Insurance companies Only insurers can manufacture and issue insurance policies or contracts.

The Medical Information Bureau (MIB) is formed by: A The Government B Medical professionals C Insurance companies D Employers

C Insurance companies The MIB is a member-owned corporation that operates on a not-for-profit basis in the United States and Canada. The MIB's Underwriting Services are used exclusively by MIB-member life and health insurance companies to assess an individual's risk and eligibility during the underwriting of life, health, disability income, critical illness, and long-term care insurance policies.

What happens to the overall policy premium when most riders on a life insurance policy expire? A It goes up B It stays the same C It goes down D It is refunded

C It goes down Most life insurance policy riders have a premium associated with it. Once the rider expires so too does the obligation to continue paying its premium.

Which of the following policies is used in estate planning to fund irrevocable trusts? A Juvenile Insurance B Variable Life C Joint Survivorship Life Policy D Joint Life

C Joint Survivorship Life Policy A Joint Survivorship Life Policy pays the death benefit upon the death of the last insured to die. It is used in estate planning situations to fund irrevocable trusts.

Which of the following must be displayed in an agent's office for inspection? A Proof of appointment B Continuing education certificate of completion C License D Exam score

C License A license must be prominently displayed in a licensee's office for view and inspection.

A married couple is interested in an annuity settlement option that will guarantee them both an income for as long as they live, an amount which reduces to 2/3 of that initial amount after one of them dies. What should they select? A Dual Life Income B Life Income Period Certain C Life Income Joint and Survivor D Joint Life Income

C Life Income Joint and Survivor The Life Income Joint and Survivor Settlement Option pays a periodic benefit until the last surviving recipient dies. However, depending upon which survivor option is chosen (e.g. joint-and-full, joint-and-2/3, joint-and-1/2), the benefit paid following the first death could be different.

Which of the following products provides an immediate lump sum in the event of premature death? A Social Security B Disability Insurance C Life insurance D Annuity

C Life insurance Of these options, only life insurance provides an immediate lump sum upon death.

Interest earned on premiums paid to an insurer helps to ________ the premiums charged. A Stabilize B Increase C Lower D Standardize

C Lower Interest earned on premiums assists in premium rate reduction.

The unfair trade practice of defamation can be defined as: A Misrepresenting the true nature of a policy B Filing false statements with any public official C Making a false statement about an insurer's financial condition intended to injure a person engaged in the insurance business D Publishing any misleading statement about the business of insurance

C Making a false statement about an insurer's financial condition intended to injure a person engaged in the insurance business Defamation is defined as making, encouraging the making, or abetting by any means an oral or written statement about an insurer's financial condition that is false, maliciously critical, or derogatory, and is intended to injure any person engaged in the business of insurance.

The Minnesota Life and Health Insurance Guaranty Association requires life and health insurers to deliver what form to the applicant at the time of application? A Notice Regarding Replacement B Outline of coverage C Notice Concerning Policyholder Rights D Buyer's Guide

C Notice Concerning Policyholder Rights The Notice Concerning Policyholder Rights must be delivered at the time of application. The notice provides disclosures and information relating to the coverage provided by the Association. The notice must emphasize the policyholder should not rely on the Association when selecting an insurer.

If it is known or should be known by the agent that an existing policy is going to be lapsed, forfeited, surrendered or terminated in favor of a new policy, the agent must submit a: A Cancellation of Service B Notice Regarding Conservation C Notice Regarding Replacement D Statement of Release

C Notice Regarding Replacement Replacement rules require a Notice Regarding Replacement.

If a taxable event occurs regarding the cash value of a permanent life insurance policy, in virtually every case, the taxable amount is taxed as: A Short-term capital gain B Tax preference item C Ordinary income D Long-term capital gain

C Ordinary income In just about every case, if there is a taxable event associated with a permanent life insurance policy. The IRS considers it ordinary income

A misstatement of an insured's age was not discovered until after the insured died. The policy had been in effect for 3 years. What will the insurer do to address this situation? A Assess a charge for re-underwriting the policy from the beneficiary B Cancel the policy C Pay benefits based on what past premiums would have purchased at the correct age D Issue a new policy

C Pay benefits based on what past premiums would have purchased at the correct age The Misstatement of Age or Sex Provision states that if the insured's age or gender has been misstated, the insurer is allowed, at the time of claim, to adjust benefits according to the amount the premiums would have purchased at the correct age or gender.

If an insured dies during the policy's grace period, the insurer will: A Pay the death benefit after the beneficiary has paid the premium due B Pay the death benefit and waive the premium due C Pay the death benefit, less the amount of premium due D Deny the claim

C Pay the death benefit, less the amount of premium due The policy is in force during the grace period and if death occurs during the grace period, the insurer pays the death benefit, minus any premiums or loans due.

The nonforfeiture option that provides coverage for the longest period of time is: A Extended Term B Automatic Premium Loan C Reduced Paid-Up D Cash surrender value

C Reduced Paid-Up Extended term provides the most amount of coverage for the least amount of time, whereas reduced paid-up provides the least amount of coverage for the longest period of time.

An insured, whose policy is in force, intentionally kills herself 7 months after purchasing the policy. How much will the insurer pay? A Refund of premiums paid less the costs of policy issuance B The face amount of the policy C Refund of premiums paid only D Nothing

C Refund of premiums paid only Suicide within 2 years of policy issue is a common exclusion in life insurance (the time can vary by state). Only premiums paid are refunded.

In a replacement sale all of the following are producer responsibilities, except: A Provide copies of the notice regarding replacement and any sales proposals to the applicant and replacing insurer B Complete a notice regarding replacement with applicant and producer signatures C Reimburse the applicant for any surrender charges that may be incurred as a result of the transaction D Obtain information regarding the in force policies including name and policy numbers

C Reimburse the applicant for any surrender charges that may be incurred as a result of the transaction Reimbursing the applicant for any surrender charges that may be incurred is not permitted, but may indicate an improper replacement.

All of the following are essential elements of a legal contract, EXCEPT: A Consideration B Competent Parties C Representation D Legal Purpose

C Representation Representation is not one of the four essential elements of a legal contract. (Offer and Acceptance is the fourth essential element.)

All of the following are essential elements of a legal contract, EXCEPT: A Consideration B Legal Purpose C Representation D Competent Parties

C Representation Representation is not one of the four essential elements of a legal contract. (Offer and Acceptance is the fourth essential element.)

If the producer discovers that the applicant is not in good health at time of a life insurance policy delivery. If the initial premium has not been paid, it is the producer's responsibility to: A Deliver the policy and collect the premium as planned B Charge a higher premium than what is written in the policy C Return the policy to the insurer for further underwriting D Hold onto the policy until the client recovers from their condition, then deliver the policy

C Return the policy to the insurer for further underwriting If the applicant is not in good health and the initial premium has not been paid, the policy should be returned to the insurer to further underwriting.

_________ Options allow for the distribution of the life insurance death benefit, to the named beneficiary or contract owner, as the situation warrants. A Nonforfeiture B Dividend C Settlement D Accumulation

C Settlement A Settlement Option dictates a mode of payment to a beneficiary (e.g. Fixed Amount, Fixed Period, Life Income, etc.) The owner may choose Settlement Option for a beneficiary that may not be changed by the beneficiary.

To eliminate the use of life insurance as a short-term, tax-free savings vehicle, what tax law change took place? A Loan interest became tax-deductible B Death benefits became income-taxable C The Modified Endowment Contract (MEC) rules were put into place D Employer-paid premiums were made non-tax-deductible

C The Modified Endowment Contract (MEC) rules were put into place Good Job! The rule states that if a policy is funded too quickly, it will be classified as a Modified Endowment Contract (MEC). MEC rules impose stiff penalties to eliminate the use of life insurance as a short-term, tax-free savings vehicle.

If an employee does not enroll during open enrollment and they still want coverage, what happens? A They cannot obtain as much coverage as those who enrolled during the open enrollment B They pay more in premiums than those who enrolled during the open enrollment C They must provide proof of insurability D The forms of insurance are more limited when they do apply for coverage

C They must provide proof of insurability They must provide evidence of insurability unless they wait until the next open enrollment period.

An accident and health policy form may be disapproved by the Commissioner for which of the following reasons? A The individual policy form includes a minimum lifetime loss ratio guarantee B The benefits provided are reasonable in relation to the premium charged C The actuarial reasons and data submitted do not justify the rate D The rates are competitive with other insurers

C The actuarial reasons and data submitted do not justify the rate The Commissioner may disapprove a policy form if the actuarial reasons and data submitted do not justify the rate, the benefits provided are unreasonable in relation to the premium charged, the proposed premium rate is excessive or inadequate, or the form contains any provision that is unlawful or encourages misrepresentation of the policy. Individual policy forms may have individual policy rates if the form includes a minimum lifetime loss ratio guarantee.

An accident and health policy form may be disapproved by the Commissioner for which of the following reasons? A The rates are competitive with other insurers B The benefits provided are reasonable in relation to the premium charged C The actuarial reasons and data submitted do not justify the rate D The individual policy form includes a minimum lifetime loss ratio guarantee

Minnesota requires that advertisements identify which of the following? A How many policies the insurer offers B How long the insurer has sold the policy being advertised C The agent or insurer D The agent's commission for the policy being advertised

C The agent or insurer Advertisements for insurance in Minnesota must clearly identify the insurer, agent, or agency. The advertisements must be complete, clear, and avoid deceiving or misleading the public.

Minnesota requires that advertisements identify which of the following? A The agent's commission for the policy being advertised B How long the insurer has sold the policy being advertised C The agent or insurer D How many policies the insurer offers

In the event that an insured receives a periodic benefit as the result of exercising the Accelerated Death Benefit Rider, what information must the insurer provide to the insured? A Verification and update of the policy ownership and beneficiary designations B The life expectancy of the insured on a semi-annual basis C The amount of the accelerated payment, the remaining death benefit and cash values D The amount of taxable income that they will be reporting to the IRS

C The amount of the accelerated payment, the remaining death benefit and cash values The Accelerated Death Benefit Rider advances a terminally ill insured a portion of the death benefit.

A universal life policy has a death benefit of $125,000 and a cash accumulation value of $15,000. Generally, what will happen to the policy if there is a $5,000 partial withdrawal? A The policy will be used as collateral for a loan from the insurer for which interest will be charged B The policy will become paid up C The death benefit or cash accumulation will be reduced by the partial withdrawal D The policy will immediately be voided by the insurer

C The death benefit or cash accumulation will be reduced by the partial withdrawal A partial withdrawal also known as a partial surrender will cause the policy to have either the face amount or cash accumulation reduced by the amount of the withdrawal.

Which of the following is the least important when it comes to determining the cost of the group life insurance plan? A The nature of the work involved B Size of the group C The health of each member of the group D The group' claims

C The health of each member of the group Since evidence of insurability is not usually required, the health of each member of the group is not used when determining premiums of the group.

Which of the following would not be considered in determining a customer's suitability for life insurance? A The customer's need for insurance B The appropriateness of the offer of insurance for the group C The opinion of family and friends D The customer's income

C The opinion of family and friends In recommending life, endowment, health, LTC, annuity, or Medicare supplement insurance to a customer, an insurer must have reasonable grounds for believing the recommendation is suitable also reviewing the values, benefits, and costs of the customer's existing insurance program, if any, when compared to the values, benefits, and costs of the recommended policy or policies.

An insured has paid premiums annually on her life insurance policy. She would now like to change to a monthly premium payment. What must occur to effect this change? A The policyowner and beneficiary must agree in writing to the change and amend the original contract B The insurer and owner must agree in writing to the change and amend the original contract C The policyowner needs to contact the insurance company and request a change in premium mode D The insurer and beneficiary must agree in writing to the change and amend the original contractAn insured has paid premiums annually on her life insurance policy. She would now like to change to a monthly premium payment. What must occur to effect this change? A The policyowner and beneficiary must agree in writing to the change and amend the original contract B The insurer and owner must agree in writing to the change and amend the original contract C The policyowner needs to contact the insurance company and request a change in premium mode D The insurer and beneficiary must agree in writing to the change and amend the original contract

C The policyowner needs to contact the insurance company and request a change in premium mode Changing the mode of payment is provided for in the contract. A telephone call from the policyowner to the insurance company can effect the change beginning with the next premium due date. in most cases, however, companies will want to receive the request in writing.

Choose the false statement about the expiration of an insurance license. A The renewal fee for a lapsed license is twice the unpaid renewal fee B The producer must complete continuing education requirements before the renewal date C The producer has a 31 day grace period after the renewal date to pay the renewal fee D The producer can reinstate a lapsed license within a year of the due date without passing another exam

C The producer has a 31 day grace period after the renewal date to pay the renewal fee The insurance license will expire on the renewal date if the renewal fee is not received by the due date.

All of the following are examples of an absolute assignment, except: A A donor transfers ownership of a paid-up policy to charitable organization as a donation B A business permits the change of ownership of a company owned policy over to a retiring executive C Using a Life Insurance policy as collateral for a loan D A court orders the existing policyowner to change it to their ex-spouse

C Using a Life Insurance policy as collateral for a loan The owner, and only the owner, possesses all of the rights in the policy, one of which is the right to assign. When a policy is used to collaterize a loan it is referred to as a temporary or collateral assignment.

A client purchases a life insurance policy and receives the policy from the insurer 45 days after application. Upon receipt of the policy, the client typically has ______days to review and return the policy to receive a full refund for any reason. A. 20 B. 45 C. 10 D. 35

C. 10 The standard Free Look, or Right to Examine provision allows the insured to return the policy for any reason within 10 days after policy delivery.

Every agent in Minnesota must maintain financial records for how many years? A. 2 B. 5 C. 6 D. 3

C. 6 Agents in Minnesota must keep financial records for 6 years.

An insurance policy form is effective if not disapproved within how many days of submission to the Commissioner? A. 20 B. 10 C. 60 D. 30

C. 60 If the Commissioner does not disapprove or otherwise object within 60 days after the filing of any form, the form will be deemed approved.

D $90,000 The collateral assignee, the bank, will take a priority claim on the policy's death benefit limited to the amount of the loan outstanding at the time of death, the named beneficiary will receive the balance. In this case $90,000 ($100,000 - $10,000).

After receiving a person's written request for cancellation of a policy, an insurer in Minnesota must return all payments made for the policy within how many days? A 5 B 30 C 21 D 10

D 10 The insurer must return all payments made for the policy within 10 days after it receives notice of cancellation and the returned policy, and the notice must be modified to notify the purchaser that they are entitled to a refund.

Copies of all advertisements for life and health insurance policies to be delivered in Minnesota must be kept on file for at least ___________. A 6 months B 6 years C 1 year D 3 years

D 3 years A copy of each advertisement used must be kept on file at the insurer's main office for at least 3 years and be subject to regular and periodic inspection by the Department of Commerce.

The insurer must notify the Commissioner within __________ after the termination of a producer's appointment is effective. A 24 hours B 10 days C 5 days D 30 days

D 30 days An insurer terminating a producer's appointment must notify the Commissioner, stating the reason, within 30 days after the termination's effective date.

The insurer must notify the Commissioner within __________ after the termination of a producer's appointment is effective. A 5 days B 24 hours C 10 days D 30 days

D 30 days An insurer terminating a producer's appointment must notify the Commissioner, stating the reason, within 30 days after the termination's effective date.

In Minnesota, once an oral agreement for a binder has been made, how many days does a producer have to execute the binder? A 30 days B 15 days C 10 days D 5 days

D 5 days A producer must execute the oral agreement to the insured within 5 business days.

Every agent in Minnesota must maintain financial records for how many years? A 5 B 3 C 2 D 6

D 6 Agents in Minnesota must keep financial records for 6 years.

An insurance policy form is effective if not disapproved within how many days of submission to the Commissioner? A 10 B 30 C 20 D 60

D 60 If the Commissioner does not disapprove or otherwise object within 60 days after the filing of any form, the form will be deemed approved.

In Minnesota, what is the continuing education requirement in order to sell annuity contracts? A An initial 8-credit course, followed by a 4-credit course every renewal period B 3 hours every renewal period C A one-time, 8-credit training course D A one-time, 4-credit training course

D A one-time, 4-credit training course In order to sell annuities, a producer in Minnesota must complete a one-time, 4-credit training course over various annuity topics.

In Minnesota, which of the following is not an acceptable reason for the Commissioner to issue a temporary license? A A producer enters into active military service, and selects a designeee to continue their business B A producer becomes disabled, and their spouse requests a temporary license C A business entity's designated producer dies, and an employee requests a temporary license D A producer's business has been disposed of, and the representative wishes to continue to do business

D A producer's business has been disposed of, and the representative wishes to continue to do business A temporary license is issued fr a period up to 180 days, and the license period ends after the owner or personal representative disposes of the business.

When can a policyowner make a change in the policy's coverage or other benefits if an irrevocable beneficiary has been named? A After obtaining the insurer's consent B After obtaining a court order C At any time D After the irrevocable beneficiary dies

D After the irrevocable beneficiary dies The policyowner may not change an irrevocable beneficiary unless the beneficiary dies or provides written consent for the change. If an irrevocable beneficiary is named, the owner may not make changes to the policy that affect the coverage or benefits without consent of the beneficiary.

Which of the following concerning Noncontributory Group Life insurance is FALSE? A 100% participation is required B The employee pays none of the premium C No evidence of insurability is required on the part of the participant D An employer pays 75% of the premium

D An employer pays 75% of the premium To minimize the effects of adverse selection, a noncontributory group life policy must cover 100% of the eligible employees. The employer pays 100% of the premium.

For which of the following reasons may an insured return the policy for a full refund within the Free Look Period? A Death of the agent B Increase in premium C Decline in financial rating of the insurance company D Any reason

D Any reason The insured/owner has the right to examine the policy for 10 days after delivery. If returned within that period, a full refund of premium is granted. It is the insurer's responsibility to prove the date of delivery.

A licensed producer moves from Illinois to Minnesota. What must the producer do in order to become a resident producer in Minnesota? A Be appointed by an agency in Minnesota B Take a prelicensing course C Take a Minnesota licensing exam D Apply for a Minnesota license within 90 days after moving

D Apply for a Minnesota license within 90 days after moving If a nonresident producer moves into Minnesota and wishes to become a resident producer, they must submit an application within 90 days of establishing legal residence. There is no prelicensing, exam, or appointment required to receive a license.

With a Contributory Group Life Plan, what percentage of the employees must participate? A A full 100% B At least 50% C At least 60% D At least 75%

D At least 75% A Contributory Plan is one in which the participants pay all or a portion of the premiums. The high enrollment percentage, 75%, helps to minimize the risk of adverse selection.

Which underwriting source is primarily used when an application reveals conditions for which more medical information is required? A Medical Information Bureau Report B Inspection Report C Agent's Report D Attending Physician's Statement

D Attending Physician's Statement The Attending Physician's Statement would be ordered by the underwriter to secure the additional medical information.

Primarily, the _________ is the person who will receive any residual contract benefits after the annuitant has died. A Spouse B Insurer C Owner D Beneficiary

D Beneficiary The beneficiary of an annuity receives any residual contract benefits upon the death of the annuitant.

Which of the following is FALSE regarding Settlement Options? A If the policyowner has chosen an option prior to death, the beneficiary cannot change it at time of claim B A policyowner may change a previously chosen settlement option before the insured dies C Settlement Options are used when the owner wants to convert a lump sum death benefit to an income stream for the beneficiary D Both principal and interest received as a result of a settlement option are taxed as ordinary income to the beneficiary

D Both principal and interest received as a result of a settlement option are taxed as ordinary income to the beneficiary Only the interest would be taxed to the beneficiary, not the principal.

By what means does the client acknowledge that an insurer may use services and information provided by third parties to gather information during the underwriting process? A By accepting a copy of the Fair Credit Reporting Act brochure from the producer B By signing the check given to the producer for the modal premium C By verbally acknowledging that the producer informed him or her about the Fair Credit Reporting Act D By signing the application

D By signing the application The insurance company must meet requirements under the FCRA when gathering information about an applicant from a third party. The signature on the application acknowledges that the applicant has been given the required notice of information practices. The applicant has the right to request a copy of any prepared reports from a reporting agency. Any inaccurate or incomplete information found in any report may be challenged by the applicant.

The ____________ has the power to issue rules and regulations to help enforce insurance laws. A Federal Insurance Office B United States Supreme Court C NAIC D Commissioner, Superintendent, or Director

D Commissioner, Superintendent, or Director The chief insurance regulatory official of each state, which may be called the Director, Superintendent, or Commissioner, has the power to issue rules and regulations to help enforce insurance laws.

In a legal sense, premium functions as the insured's _______. A Fee B Credit C Tender D Consideration

D Consideration The premium paid by the insured represents their consideration--a required element of a legal contract.

As the cash value increases in a traditional whole life policy, the net amount at risk ____________, but the face amount of the policy would remain the same. A Increases B Remains the same C Varies D Decreases

D Decreases As the cash value increases, the net amount at risk decreases, but the face amount of the policy would remain the same.

Sean has a home with a mortgage. He needs life insurance to protect his family but also wants to leave them without a mortgage payment if he dies. Ideally which of the following riders should he acquire? A Family Rider B Increasing Term Rider C Level Term Rider D Decreasing Term Rider

D Decreasing Term Rider Decreasing Term Riders are ideally suited to cover the balance of an outstanding mortgage

Choose the true statement about agent commissions in Minnesota: A The commission rate is determined by the insurer at the time the policy is sold B The insurer must give the producer 90 days' notice that the compensation is changing C An unlicensed person may accept only 10% of the commission earned by a partner licensed producer D Deferred commissions may be paid to a person who is not licensed but was at the time the policy was sold

D Deferred commissions may be paid to a person who is not licensed but was at the time the policy was sold Renewal or other deferred commissions may be paid to a person who was a licensed producer when the insurance was sold, solicited, or negotiated.

A producer should do all of the following when meeting with the client after the policy has been issued, except: A Go over the benefits and exclusions B Explain the policy to the applicant C Review any endorsements and riders D Disclose the amount of commission earned on the sale

D Disclose the amount of commission earned on the sale The producer should explain the policy to be sure the client understands the benefits, including any ratings, endorsements, and riders.

All of the following are underwriting criteria taken into account by the insurer in the underwriting of individual life insurance cases, except: A Medical history B Gender C Physical condition D Education level completed

D Education level completed Underwriting for educational level completed would be discriminatory.

J buys a life insurance policy specifically intending for the death benefit to be used to cover estate taxes. What is the correct term for using life insurance in this way? A Estate creation B Preneed planning C Survivor protection D Estate conservation

D Estate conservation Using life insurance proceeds to pay estate taxes is a means of "conserving" the estate for the heirs.

Concerning the Paid-Up Additions Dividend Option, all of the following are true, except: A Paid-up additions have their own increasing cash values B These single premium additions do not change the face value of the original policy C Paid-up additions increase the amount of future dividends credited D Eventually, no more premiums will be due on the policy

D Eventually, no more premiums will be due on the policy The Paid-Up Additions purchased under this Option have their own values and do not change the face amount of the original policy. Each additional segment of insurance contains both a death benefit and increasing cash surrender value, and by purchasing paid-up additions, larger dividends may be paid in the future. Paid up additions do not eliminate need to pay premiums on the original policy.

After the first licensing term, when does an agent's license expire in Minnesota? A Every 24 months on the licensee's birthday B Every 24 months on the license anniversary date C Every 12 months on the license anniversary date D Every 24 months on the last day of the licensee's birth month

D Every 24 months on the last day of the licensee's birth month After the first licensing term, an agent's license will expire on the last day of their birth month every 2 years.

If an insurer wants a property and casualty insurance policy form to be effective before the 60-day filing period is over, they should use which filing procedure? A Immediate B Standard C Quick D Expedited

D Expedited An insurer may use expediated filing if it wants the policy forms to be reviewed by the Commissioner before the standard 60-day filing period passes. This allows the insurer to begin using the forms once the review is complete instead of waiting 60 days.

If an insurer wants a property and casualty insurance policy form to be effective before the 60-day filing period is over, they should use which filing procedure? A Standard B Quick C Immediate D Expedited

When a policy lapses due to nonpayment of premium, which nonforfeiture option is the automatic option? A Cash surrender value B Automatic premium loan C Reduced paid-up D Extended term

D Extended term The automatic nonforfeiture option is extended term. Automatic premium loan is a policy provision which must be elected by the policyowner in advance of the policy lapsing.

If the beneficiary is concerned about a particular amount of cash flow each month, the _______ settlement option should be selected. A Life with Period Certain B Fixed Period C Interest Only D Fixed Amount

D Fixed Amount Fixed Amount Payments are for a specified dollar amount paid monthly until the benefits along with interest are exhausted. An increase in declared interest will extend the time period in which the benefits are paid.

If the beneficiary is concerned about a payout for a particular period of time, the _______ settlement option should be selected. A Fixed Amount B Life with Period Certain C Joint and Survivor D Fixed Period

D Fixed Period Fixed Period Payments are guaranteed for a specified period of time, such as 10 or 20 years, after which time payments will cease. The proceeds and interest are used to make the payments.

Annuities may be funded with either a lump sum or a ______ premium basis. A Life B Variable C Indexed D Flexible

D Flexible Contributions made during the accumulation period are made with a lump sum or on either a periodic or a flexible basis depending on contract design.

______ are primarily social organizations that engage in charitable and benevolent activities consisting of members of a given faith, lodge, or order, and are usually organized as non-profits. A Mutual Insurance Companies B Domestic Insurance Companies C Stock Insurance Companies D Fraternal Benefit Societies

D Fraternal Benefit Societies This question describes a Fraternal Benefit Society.

Which of the following best defines the 'Cost Recovery Rule'? A The earnings on the policy's cash values are taxed every year and build up a cost basis which is recovered income tax-free upon surrender B The amount of the policy's internal expenses plus the life producer's commission make up the total cost of the policy C When a policy is surrendered, the earnings within the policy are accounted for first D Generally, the difference between the amount of cash value received and the amount of premium paid in is subject to income tax upon surrender

D Generally, the difference between the amount of cash value received and the amount of premium paid in is subject to income tax upon surrender The 'Cost Recovery Rule' stipulates that upon a partial withdrawal of cash or the surrender of a policy, the cash value in excess of premiums paid (cost basis) is subject to income tax.

The _________ is the time period provided after the premium due date before a policy lapses. A Reinstatement period B Automatic premium loan period C Premium mode D Grace period

D Grace period The grace period is the time period provided after the premium due date before a policy lapse

All of the following riders will waive the premiums in the event of a disability, except: A Waiver of Premium B Payor Benefit C Waiver of Monthly Deduction D Guaranteed Insurability

D Guaranteed Insurability Guaranteed insurability provides the insured with the right to buy coverage at specified times in the future.

Death benefits paid from an employee group life insurance plan to an employee's named beneficiary are received __________. A Income tax penalty-free B Income tax-deferred C Income tax-deductible D Income tax-free

D Income tax-free Death benefits paid in a lump sum to a named beneficiary are income tax-free.

All of the following about Universal Life are true, except: A The fixed expense charges from the policy are deducted monthly from the cash values B The premium paid can be increased, decreased, or even skipped C The mortality charge is determined annually, based on age D Increases in face amount do not require proof of insurability if under $100,000

D Increases in face amount do not require proof of insurability if under $100,000 The insured can increase or decrease the face amount. Any increase in the face amount will require evidence of insurability.

Which principle states that an insured may be reimbursed up to the amount of the actual loss? A Fair Claims Settlement B Insurable Risk C Adhesion D Indemnity

D Indemnity The Principle of Indemnity states that the insured should not profit from an insurance transaction, but should be restored in whole or in part to their prior condition.

If no beneficiary is living at the time of the insured's death, the benefit will automatically be paid __________. A The funeral home B To next of kin C The deceased's spouse D Into the insured's estate

D Into the insured's estate The policyowner may name the estate as a beneficiary, or by default, if no beneficiary is living at the time of the insured's death, the benefit will automatically be paid into the insured's estate.

Why have many states prohibited STOLI/IOLI transactions? A Mostly the investors are not licensed to conduct such a transaction B The amount the policyowner obtains is too little in relationship to the death benefit C Consumers are not reporting the cash received as taxable income D It is a violation of the insurable interest rule

All of the following are TRUE about the Automatic Premium Loan (APL) Provision, except: A It can be cancelled at any time by the policyowner B It must be elected by the policyowner C It becomes effective, if elected, at the end of the grace period D It is available on any type of life insurance policy

D It is available on any type of life insurance policy The Automatic Premium Loan Provision is available on cash value policies only.

Burt named Liz as his beneficiary; however, he did not choose a Settlement Option. At the time of his death, who determines the option to be used to receive the benefits? A Burt's estate, since no Settlement Option was chosen B Lump sum is the automatic option when no option was preselected prior to death of the insured C The insurer decides when the election is not made by the policyowner prior to death D Liz the beneficiary determines which option she would like to have

D Liz the beneficiary determines which option she would like to have If the owner of the policy does not select a Settlement Option while alive, then the beneficiary may choose an option at the time of claim.

Instead of waiting to receive her payments over time, Jeanne decides to obtain the greatest amount of money out of her annuity immediately. Which option did she choose? A Straight Life Option (Life Income) B Life Income with Refund C Life Income Period Certain D Lump Sum

D Lump Sum The annuity policyowner is not required to elect a settlement option. Instead they have the right to surrender the policy just like a cash value life insurance policy to receive the policy's cash surrender value.

The unfair trade practice of defamation can be defined as: A Publishing any misleading statement about the business of insurance B Filing false statements with any public official C Misrepresenting the true nature of a policy D Making a false statement about an insurer's financial condition intended to injure a person engaged in the insurance business

D Making a false statement about an insurer's financial condition intended to injure a person engaged in the insurance business Defamation is defined as making, encouraging the making, or abetting by any means an oral or written statement about an insurer's financial condition that is false, maliciously critical, or derogatory, and is intended to injure any person engaged in the business of insurance.

All of the following are riders that can provide for additional temporary coverage on a new or existing policy, except: A Insured B Spouse C Children D Neighbor

D Neighbor Term riders require that the policyowner have an insurable interest in the person covered under the rider. Neighbors don't qualify

If after a policy has been issued and delivered, the insurer discovers unanswered questions on the application, what can the insurer legally do at this point? A Require the applicant/insured to answer the questions and re-underwrite the policy B Increase the policy's premium C Cancel the policy D Nothing, the insurer has waived its right to that information

D Nothing, the insurer has waived its right to that information If a policy is issued with a question unanswered, the contract will be interpreted as if the question had not been asked, and is therefore waived by the insurer.

Lucy uses her dividends to purchase single premium additional permanent benefits at her attained age. Which Dividend Option is Lucy exercising? A Paid-up Option B One-Year Term C Reduced Paid-Up D Paid-up Additions

D Paid-up Additions Only Paid-up Additions, Paid-up Option and One-Year Term are dividend options. Reduced Paid-Up is a nonforfeiture option. Lucy wanted additional permanent benefits so she should choose Paid-up Additions.

If an insured pays a premium that is lower than others that are in the same class, this insured is considered to be rated as? A Reduced B Substandard C Standard D Preferred

D Preferred Individuals who meet certain requirements (such as ideal health, height and weight, low occupational stress, etc.) are preferred risks

To help protect against experiencing immediate claims, group plans have a(n) _______ period set up by the group sponsor. A Open enrollment B Elimination C Conversion D Probationary

D Probationary A probationary period is set up to help reduce the chance of facing immediate claims.

The nonforfeiture option that provides protection to age 100 is: A Extended Term B Paid-up Additions C Cash Surrender D Reduced Paid-Up

D Reduced Paid-Up With Reduced Paid-Up, the Present cash value is used to buy a single premium, permanent paid-up policy of a reduced face amount. Coverage will continue to age 100.

All of the following are essential elements of a legal contract, EXCEPT: A Competent Parties B Legal Purpose C Consideration D Representation

D Representation Representation is not one of the four essential elements of a legal contract. (Offer and Acceptance is the fourth essential element.)

Statements made on the application by the applicant that are believed to be true to the best of the applicant's knowledge are called: A Waivers B Conditions C Warranties D Representations

D Representations Statements made on the application by the applicant are known as representations. Representations are believed to be true to the best of the applicant's knowledge. Warranties are statements that are guaranteed to be true.

On the day a newly-issued policy was to be delivered and the initial premium collected, the producer discovers that the insured is in the hospital with a heart condition pending surgery. What should the producer do? A Collect additional premium at the time of delivery to reflect the higher risk the insurer now faces B Hold onto the policy until the insured is discharged from the hospital and then deliver the policy C Deliver the policy to an immediate family member and collect any outstanding premium D Return the policy to the insurer with a letter of explanation

D Return the policy to the insurer with a letter of explanation Producers must return the policy to the insurer if they know that the insured's health status has materially changed since the time of application.

In a Universal Life policy, the minimum separation between the cash value and the death benefit is called the _______. A The earned interest B The MEC limit C The cash value D Risk corridor

D Risk corridor A universal life policy must include an amount at risk. If the cash value approaches the face amount, the death benefit must increase so as to provide for this amount at risk. This minimum separation between the cash value and the death benefit is called the 'risk corridor.'

A producer's license has been suspended for violating Minnesota's insurance laws. What is the first action the producer should take? A Obtain a performance bond B Request a hearing C Reapply for a new license D Surrender the license to the Commissioner

D Surrender the license to the Commissioner Once a license has been suspended, the licensee must immediately deliver their license to the Commissioner. They may not reapply for a new license for 2 years, and must obtain a $20,000 performance bond if the Commissioner accepts their application for a new license. The licensee may request a hearing, but this happens after surrendering the license to the Commissioner.

A producer's license has been suspended for violating Minnesota's insurance laws. What is the first action the producer should take? A Request a hearing B Reapply for a new license C Obtain a performance bond D Surrender the license to the Commissioner

Which provision requires the application, the contract itself and any riders to be attached to establish a complete contract? A The Ownership Provision B The Incontestability Provision C The Insuring Clause D The Entire Contract Provision

D The Entire Contract Provision The Entire Contract Provision states that the contract consists of the basic policy, a copy of the application, and all riders.

Minnesota requires that advertisements identify which of the following? A The agent's commission for the policy being advertised B How long the insurer has sold the policy being advertised C How many policies the insurer offers D The agent or insurer

D The agent or insurer Advertisements for insurance in Minnesota must clearly identify the insurer, agent, or agency. The advertisements must be complete, clear, and avoid deceiving or misleading the public.

When an applicant completes the insurance application in its entirety and provides the producer with a premium check, what in effect has taken place? A The applicant has given the producer the authority to negotiate the terms of the contract with the insurer B The producer is making an offer of insurance to the applicant C The applicant is accepting the producer's offer of coverage D The applicant is making an offer to the insurer

D The applicant is making an offer to the insurer When an application accompanies the initial premium, the applicant is making an offer to the insurer. Before acceptance can take place, an offer must first be made. The insurer accepts the offer when the policy is issued.

An individual dies 15 days after being terminated from their employment. If their employer provided a group life insurance policy to all employees, what happens to the individual's death benefits? A The individual would have no death benefit because they died after their employment ended B The insurer may choose to provide $1,000 to any person they deem entitled C No benefit is paid unless the individual applied to convert their group policy to an individual policy D The death benefits would be paid under the group policy

D The death benefits would be paid under the group policy Whether or not the individual elected conversion or continuation, death benefits are paid under the group policy if the individual dies within the 31-day day period after termination.

What is the net amount at risk in a Whole Life Insurance policy? A The face amount of the policy B The face amount minus any dividends paid C The face amount plus the cash values D The face amount less the cash values

D The face amount less the cash values The net amount at risk to the insurer is the difference between the face amount and the cash values.

What is the net amount at risk in a Whole Life Insurance policy? A The face amount plus the cash values B The face amount of the policy C The face amount minus any dividends paid D The face amount less the cash values

D The face amount less the cash values The net amount at risk to the insurer is the difference between the face amount and the cash values.

Choose the true statement about the replacement process of life insurance. A Replacement regulations apply to both group and individual life insurance B The replacing insurer must notify the existing insurer of the replacement within 15 days after the replacement policy is issued C The replacing insurer must maintain evidence that all requirements were met when selling a replacement policy for 5 years D The insured must exercise the right to an unconditional refund within 30 days of the policy delivery

D The insured must exercise the right to an unconditional refund within 30 days of the policy delivery The life insurance policy or contract, or a separate written notice must be delivered with the policy that advises the insured of the right to an unconditional refund of all premiums paid as long as the insured exercises this right within 30 days beginning the date of policy delivery.

Clayton is asking his life insurance producer about any potential taxation issues related to his $100,000 personal Whole Life policy. All of the following are TRUE, except: A Since his policy is a personal policy, he cannot deduct the premiums he pays for the policy B Upon surrender of the policy, he will be taxed on any amount by which the cash value exceeds the cost basis (premiums paid) of the contract C Annual increases in the policy's cash value are not taxable at the time they are credited to the policy D The interest that he pays on policy loans is tax-deductible

D The interest that he pays on policy loans is tax-deductible The interest on policy loans is not tax-deductible.

Which of the following is false regarding the process of conducting a hearing regarding the violation of an insurance law? A The Commissioner may bring an action in court to enforce compliance with the law B Hearings are held within 10 days after the Commissioner receives a request for a hearing C The attorney general may be asked to handle the matter in question D The order automatically becom

D The order automatically becomes permanent if a hearing is not requested within 14 days If no hearing is requested within 30 days after a cease and desist order is served, the order becomes permanent until vacated by the Commissioner.

Which of the following is responsible for paying the premiums due on a life insurance policy? A The beneficiary B The producer C The insured D The policyowner

D The policyowner It is the policyowner's responsibility to pay the premiums due in full and on time.

The maximum amount the accidental death and dismemberment rider will pay out before it expires is A There is no stated maximum. It depends on how often the insured is insured. B The capital sum C The capital sum plus the principal sum D The principal sum

D The principal sum The principal sum is the maximum payout. It may be paid as a result of the insured's death, or due to multiple injuries

Participating policy dividends become taxable as income when: A They are declared by the board of directors B The policyowner receives them in cash C They are distributed by the insurer D The total amount of dividends received by a policyowner exceeds the total amount of premium he/she has paid

D The total amount of dividends received by a policyowner exceeds the total amount of premium he/she has paid When the total amount of dividends received exceeds the total amount of premium paid, the excess is taxable as income to the policyowner.

In Minnesota, an unauthorized individual sold an insurance policy on behalf of an insurer. If the insured suffers a loss, who is liable? A The insured B A court must determine liability C The insurance company D The unauthorized individual

D The unauthorized individual Any unauthorized person who participates in the sale of insurance for or on behalf of an insurer is personally liable for any loss the insured sustains. The unauthorized person is also liable for all premiums paid by the insured.

A grandparent purchases a life insurance policy on their granddaughter. This is an example of _________. A Wealth Transfer B Key Person Insurance C Two-Party Ownership D Third-Party Ownership

D Third-Party Ownership

If an insurer has not received a certificate of authority from the Commissioner, what are they called? A Mutual insurer B Fraternal benefit society C Authorized insurer D Unauthorized insurer

D Unauthorized insurer An unauthorized insurer is one that has not received a certificate of authority from the Commissioner. It is illegal for an unauthorized insurer to perform any insurance business in this state

Which term refers to a contract in which only one party is legally bound to contractual obligations after the premium is paid? A Contract of Adhesion B Conditional Contract C Aleatory Contract D Unilateral Contract

D Unilateral Contract A unilateral contract is a one-sided contract. Only the insurer makes a promise of future performance, and only the insurer can be charged with breach of contract. The policyowner can cancel the policy at any time without legal obligation.

Which of the following annuities typically offers no guarantees? A Bonus Interest Rate Annuities B Indexed C Fixed D Variable

D Variable The variable annuity holder assumes all investment risk.

Why should a producer collect a premium at the time the application is completed? A It helps the home office with its cash flow B It allows the producer to get paid faster C It allows the insurer to afford to pay for any required medical records or tests D Without it, coverage cannot go into effect, as there would be a lack of consideration

D Without it, coverage cannot go into effect, as there would be a lack of consideration Collecting the premium at the time of application allows the producer to issue a conditional coverage receipt, which can bring coverage into effect as early as the date of the application, provided all the conditions have been satisfied.

Harry, the annuitant of a non-qualified tax deferred annuity with $40,000 cash value chooses the Life Income with Refund Payment Option when he annuitizes the policy. After receiving $1,000 each month for 80 months, Harry suddenly dies. How much will his beneficiary, his wife Lucille, receive? A Payments over the rest of her life B $80,000 C $40,000 D Zero

D Zero A Refund Option returns the remaining unpaid principal, since Harry lived well beyond the refund (principal amount) there would be no residual values remaining on the payment option selected.

An employer in Minnesota must notify a covered employee of insurance continuation rights within ____ days after termination of or layoff from employment. A. 7 B. 21 C. 10 D. 1

D. 14 An employer must notify a covered employee of insurance continuation rights within 14 days after termination of or layoff from employment.

An employer in Minnesota must notify a covered employee of insurance continuation rights within ____ days after termination of or layoff from employment. A. 21 B. 10 C. 7 D. 14

D. 14 An employer must notify a covered employee of insurance continuation rights within 14 days after termination of or layoff from employment.

In a whole life policy, cash value must be made available to borrow against after _____ years. A. 4 B. 2 C. 5 D. 3

D. 3 In whole life policies, cash values must be made available to borrow against after 3 years.

In Minnesota, once an oral agreement for a binder has been made, how many days does a producer have to execute the binder? A 5 days B 30 days C 15 days D 10 days

D. 5 Days A producer must execute the oral agreement to the insured within 5 business days.

Which of the following is an example of an appropriate advertisement in Minnesota? A A producer describes the exclusions of a policy in a deceptively positive manner B A producer gives an individual a pamphlet describing the Loss of Time benefit as unlimited C A producer tells an individual that their agency is endorsed by a government program D A producer gives a public seminar, handing out descriptive literature that clearly identifies the agency

D. A producer gives a public seminar, handing out descriptive literature that clearly identifies the agency An advertisement may provide descriptive literature and sales material in a public presentation as long as all advertisements following the marketing standards, clearly identify the agency, and does not present any information in a misleading manner.

After a life insurance policy has been in force for 5 years the insured dies. During the claims process, the insurer discovers that the insured did not disclose material health information that had it known, would have caused the application to be rejected. What can the insurer do at this point in time? A The insurer must pay out the death benefit but can then take legal action against the beneficiary based on insurance fraud B The insurer can void the contract and refund any and all premium payments received plus interest C The insurer can contest the claim D The insurer must pay out the death benefit of the policy to the named beneficiary

D. The insurer must pay out the death benefit of the policy to the named beneficiary After the policy has been in force for 2 years, except for cases of nonpayment of premium, meaning the policy has lapsed, the insurer cannot contest any claim. The policy has become incontestable.

Life Insurance

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