Life Insurance Missed Questions

Which of the following is a person who receives a fee or commission to attempt to negotiate settlements between a life insurance policyholder or certificate holder and one or more viatical settlement providers?

Life settlement broker

All of the following are Nonforfeiture options EXCEPT

Interest Only (settlement option)

Which is true about a spouse term rider?

The rider is usually level term insurance

Life insurance policy illustration rules apply to which of the following types of policies?

Whole life insurance

Considering principles of liquidity, how the would the policyowner use today's cash value in a policy?

use it for emergency expenses

What is the maximum life insurance coverage available to the state residents through the Wisconsin State Life Insurance Fund?

$10,000

Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained?

3 days

The insurer must maintain copies of all signed illustrations for a minimum of how many years after the policy is no longer in force?

3 years

The commissioner issued an order without a hearing. The person aggrieved with the order sent a demand for a hearing 20 days ago, when the hearing be held?

40 days (within 10-60 days, so 60-20 = 40)

Which of the following is NOT an allowable 1035 exchange?

A whole life insurance policy is exchanged for a term insurance policy.

Under the 401(k) bonus or thrift plan, the employer will contribute

An undetermined percentage for each dollar contributed by the employee.

A Universal Life Insurance policy is best described as a/an

Annually Renewable Term policy with a cash value account.

Which of the following is a short-term annuity that limits the amounts paid to a certain fixed period or until a certain fixed amount is liquidated?

Annuity certain

Which of the following is NOT true of Section 1035 Policy Exchanges?

Any exchange made under Section 1035 of the Internal Revenue Code must be completed within 30 days. (no time limit)

Which of the following types of agent authority is also called "perceived authority"?

Apparent

In the Executive Bonus plan, who is the owner of the policy, and who pays the premium?

Executive is the owner, and the executive pays the premium.

All of the following actions can be described as twisting EXCEPT

Explaining to client the advantages of permanent insurance over term and suggesting changing policies

An applicant is denied insurance because of information found on a consumer report. Which of the following requires that the insurance company supply the applicant with the name and address of the consumer reporting company?

Fair Credit Reporting Act

What type of insurance would be used for a Return of Premium rider?

Increasing Term

A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this?

Level Term

Using a class designation for beneficiaries means

Naming beneficiaries as a group.

Which of the following is NOT true regarding the needs approach method of determining the value of an individual's life?

Need is predicted using the number of years until the insured's retirement.

During replacement of life insurance, a replacing insurer must do which of the following?

Obtain a list of all life insurance policies that will be replaced

All of the following are examples of risk retention EXCEPT

Premiums

When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to

Purchase a single premium policy for a reduced face amount.

Which nonforfeiture option provides coverage for the longest period of time?

Reduced paid-up

Annuities can be used to fund which of the following?

Retirement plans

Agent D submitted an application for life insurance on client A. No money was sent with the application. When Agent D attempted to deliver the policy, he discovered that A had suffered a heart attack since the application was taken. The agent should

Return the policy to the insurer.

An applicant buys a nonqualified annuity, but dies before the starting date. For which of the following beneficiaries would the interest accumulated in the annuity NOT be taxable?

Spouse

The advantage of qualified plans to employers is

Tax-deductible contributions.

The Commissioner conducts an examination of a domestic insurer and believes that the costs of examination places an unreasonable financial burden on the insurer. Which of the following will happen?

The Commissioner's office may pay all or part of the costs.

The policyowner of a life insurance policy forgets to pay his monthly premium and then dies 10 days later. Which of the following is true?

The policy will pay full death benefits, less the premiums that were due.

Which of the following is the best reason to purchase life insurance rather than annuities?

To create an estate

Which of the following is NOT a goal of risk retention?

To minimize the insured's level of liability in the event of loss

The paid-up addition option uses the dividend

To purchase a smaller amount of the same type of insurance as the original policy.

Which of the following is a key distinction between variable whole life and variable universal life products?

Variable whole life has a guaranteed death benefit.

If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant no later than

With the policy.

When must insurer's provide an annuity buyer's guide and a preliminary contract summary before:

prior to accepting the first premium

Which of the following changes does NOT need to be reported to the Commissioner within 30 days?

Each commission paid to a licensee who has held a license for less than 1 year

All funds collected by an intermediary for prompt payment to insureds, insurers, or producers as entitled are received in what is known as

Fiduciary capacity.

All of the following are TRUE statements regarding the accumulation at interest option EXCEPT

The interest is not taxable since it remains inside the insurance policy.

Are insurance company underwriters allowed to discriminate?

Yes, but not unfairly

Suitability of annuity sales to seniors would apply to all of the following except

a direct response solicitation

Which of the following is INCORRECT?

an illustration must contain the name and address of the insured and the agent, but it must only contain the name of the insured (must also contain age and sex as well)

Before he died, an annuitant had received $12,500 in monthly benefits from his $25,000 straight life annuity. He was also the insured under a $50,000 paid-up whole life policy that named his wife as primary beneficiary. Considering both contracts, how much will the annuitant's spouse receive in benefits?

$50,000 (straight life annuity stops at death! so the beneficiary would not receive anything)

A person that markets insurance but does not include an insurer is called a

Firm

When an employee terminates coverage under a group insurance policy, coverage continues in force

for 31 days

The insurer decided to cancel an insurance policy prior to its expiration due to nonpayment of premium. When can cancellation take place?

10 days after the notice was delivered to the policyholder

An intermediary has just placed insurance on himself. He can receive compensation for this transaction only if he has placed insurance on other individuals with the same insurer within the last

12 months

All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT

Dividends from a mutual insurer.

Which of the following statements about the reinstatement provision is true?

It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated.

Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report

Must be informed of the source of the report.

An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do?

Pay a reduced death benefit The incontestability clause prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years. However, it does not apply to statements relating to age, sex and identity.

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?

The death benefit can be increased by providing evidence of insurability. (this occurs when death benefit increases or premium decreases!!)

A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums?

The insured's premiums will be waived until she is 21.

In a life settlement contract, whom does the life settlement broker represent?

The owner

What happens if a deferred annuity is surrendered before the annuitization period?

The owner will receive the surrender value of the annuity.

Which of the following is NOT true of life settlements?

The seller must be terminally ill.

The termination of marital property rights may be reversed for all of the following reasons EXCEPT

The spouse named as beneficiary has obtained or consented to a final decree or judgment of an annulment, divorce or separation.

Which of the following is TRUE about nonforfeiture values?

They are required by state law to be included in the policy.

Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE?

Withdrawals are not taxable. Any distributions from MECs are taxable, including withdrawals and policy loans. All of the other statements are true.

Federal law makes it illegal for any individual convicted of a crime involving dishonesty or breach of trust to work in the business of insurance affecting interstate commerce

Without receiving written consent from an insurance regulatory authority.

Which of the following is NOT an allowable reason for policy cancellation prior to its expiration date?

any misrepresentation by the insured (won't cancel if nonmaterial)

To purchase insurance, the policyowner must face the possibility of losing money or something of value in the event of loss. What is this concept called?

insured interest

According to the nonforfeiture law, if the owner decides to surrender a deferred annuity prior to annuitization, the owner is entitled to which of the following?

Guaranteed surrender value

A father purchases a life insurance policy on his teenage daughter and adds the Payor Benefit rider. In which of the following scenarios will the rider waive the payment of premium?

If the father is disabled for more than 6 months

The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose?

Interest only option

Which of the following is NOT true regarding the Life with Guaranteed Minimum annuity settlement option?

It does not guarantee that the entire principal amount will be paid out.

What is the benefit of choosing extended term as a nonforfeiture option?

It has the highest amount of insurance protection.

When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy?

It is reduced to the amount of what the cash value would buy as a single premium.

An individual purchased a $100,000 Joint Life policy on himself and his wife. Eight years later, he died in an automobile accident. How much will his wife receive from the policy?

$100,000 In joint life policies, the death benefit is paid upon the first death only.

When replacing a policy, an insurer must maintain a file containing copies of all statements for

5 years

What is the penalty for IRA distributions that are below the required minimum for the year?

50%

For how long is an insurance company allowed to defer policy loan requests?

6 months

An insurer decides to renew a policy but at a higher premium rate, starting on the renewal date. How many days in advance must the insured be notified?

60 days

Which of the following produces evaluations of insurers' financial status often used by state departments of insurance?

AM Best

An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice?

Illegal

A married couple's retirement annuity pays them $250 per month. The husband dies and his wife continues to receive $125.50 per month for as long as she lives. When the wife dies, payments stop. What settlement option did they select?

Joint and survivor

An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied?

Material Representation

Which of the following is NOT true regarding policy loans?

Money borrowed from the cash value is taxable.

Which of the following can surrender a deferred annuity contract?

Only the annuity owner

Under what circumstance may an insurer cancel or refuse to renew an insurance policy based upon the past criminal record of the insured?

Only upon conviction of an offense directly related to the risk insured

A married couple purchased a life policy on their newborn baby and is worried that they will not be able to pay premiums if they were to become disabled/pass away, what rider should they buy?

Payor Benefit

An agent's advertisements for life insurance must be approved by

The agent's company.

Which of the following characteristics applies to defined benefit plans but not defined contribution plans?

The amount of contributions made by the employer is determined by an actuarial formula.

A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true?

The amount of the distribution is reduced by the amount of a 20% withholding tax. Distributions from 401(k) plans are taxable as ordinary income in the year of the distribution. However, if the distribution is rolled over to a Traditional IRA, taxes are deferred until the required minimum IRA distributions begin (which is generally no later than age 70 1/2). Since this client actually took a distribution (instead of making a trustee-to-trustee roll over), the distribution is subject to 20% withholding tax.

Which of the following describes the tax advantage of a qualified retirement plan?

The earnings in the plan accumulate tax deferred.

An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT?

The insured may choose to convert to term or permanent individual coverage. (usually permanent!)

An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible?

The insured will need a written consent of the insurer.

When are insurance proceeds taxable by the federal government?

if there is a transfer of value

What happens to the face amount of a whole life policy when the insured reaches 100?

the face amount is paid to the insured (NOT the cash value)

In whole life policies, the policy cash value is expected to equal the face amount when...

the insured reaches age 100