Life Insurance Quiz Practice Questions

What happens to a signed application after the applied-for policy is issued? It becomes property of the state. It is sent to the MIB for permanent storage. It is destroyed. It becomes part of the contract between the insurer and the policyowner.

It becomes part of the contract between the insurer and the policyowner.

Zelda, a producer selling health insurance, assures a prospective applicant that the insurance company she represents is backed by the protections of the Washington Life and Disability Insurance Guaranty Association. Which of the following statements is correct regarding this kind of assurance? It is highly regulated by the Insurance Department. It is required when selling to senior citizens. It is prohibited at all times. It is recommended when selling life or health insurance.

It is prohibited at all times.

The Commissioner can suspend a producer's insurance license without a hearing in all of the following cases EXCEPT: The producer is convicted of a felony. The producer has violated a department regulation. The public safety is threatened. The public welfare is at risk.

The producer has violated a department regulation.

Which of the following does NOT provide independent ratings of insurance companies' financial strength and claims-paying abilities? each state's Department of Insurance Moody's A.M. Best Standard & Poor's

each state's Department of Insurance

A life insurance applicant who is a preferred risk can expect to pay a premium that is best described as which of the following? generally lower premiums than for standard risks, but over a short period of time, at which point rates increase to the same as standard rates generally the same premiums as for standard risks, for the life of the policy generally lower premiums than for standard risks for the life of the policy generally higher premiums than for a standard risk

generally lower premiums than for standard risks for the life of the policy

Which of the following is not a disciplinary measure that the Commissioner can take against a person who violates the insurance laws or regulations? fine license suspension imprisonment license revocation

imprisonment

A producer receives a policy that the insurance company issued for delivery to a new customer. The producer forgets to deliver the policy before going on an extended vacation. Who is responsible to the insured for the delayed delivery? the insurance company the Insurance Commissioner the producer alone the producer and the insurance company

the producer and the insurance company

Paul dies with a $50,000 unpaid loan (including interest) against his $150,000 life insurance policy. What death benefit will the insurance company pay his beneficiary? $100,000 $25,000 $250,000 $50,000

$100,000

Bob bought a universal life insurance policy with a $100,000 stipulated amount and chose an Option 2 (increasing) death benefit. At his death ten years later, the policy's cash value had increased to $50,000. What will his beneficiary receive? $150,000 $100,000 $200,000 $50,000

$150,000

Ben, a single working father, dies at age 50. How much will his only dependent child, Tom (age 15), receive from Social Security in a lump-sum death benefit? $750 $255 an amount equal to one month's worth of the deceased worker's primary insurance amount $0

$255

What is the most that the Washington Life and Disability Insurance Guaranty Association will pay for life insurance death benefits? $100,000 $300,000 $250,000 $500,000

$500,000

To be eligible for group life insurance, a group must generally cover at least how many people under one master policy? 1 5 10 100

10

A typical endowment policy is essentially a life insurance policy that matures before the insured reaches age 100 72 62 120

120

Jenny has purchased a variable annuity. She directs $2,500 of her $5,000 premium deposit into the contract's blue-chip stock sub-account when its net asset value is $10. How many accumulation units has Jenny bought? 160 accumulation units of the sub-account 2,500 accumulation units of the sub-account 250 accumulation units of the sub-account 1,500 accumulation units of the sub-account

250 accumulation units of the sub-account

A worker can choose to collect permanently reduced Social Security retirement benefits as early as what age? 64 62 66 60

62

All of the following statements about the regulation of the sale of variable products are correct, EXCEPT: Agents who sell variable life products are required to comply with all state laws and regulations dealing with the sale of life insurance. The sale of variable products is regulated by the Financial Industry Regulatory Authority (FINRA). Agents who only sell variable life products and do not sell fixed life products are not required to hold a life insurance license. Many states also require a state-issued variable life or variable producer's license.

Agents who only sell variable life products and do not sell fixed life products are not required to hold a life insurance license.

Which one of the following statements about term life insurance is most correct? Term life insurance is an inexpensive way to provide permanent lifetime coverage. At any given age when issued, a level term policy will be less expensive than a permanent policy of the same face amount. Term life insurance cannot be converted to permanent coverage. Term life insurance builds a cash value.

At any given age when issued, a level term policy will be less expensive than a permanent policy of the same face amount.

Reggie owns a whole life policy in which his wife Mary is the primary beneficiary. The couple has no children in common, so the contingent beneficiary is Carl, Reggie's son from a previous marriage. Mary's daughter from a previous marriage, Sue, is not a beneficiary. Reggie and Mary are in a car accident in which Reggie dies instantly and Mary survives for three days before dying from accident-related injuries. Under the policy's common disaster clause, to whom will the policy's death benefit be paid? Mary Carl Sue Reggie's estate

Carl

Which is NOT one of the ways in which an endowment policy pays its face amount? Distribution upon maturity to the policyowner Lump sum distribution to the policyowner Cash value withdrawal to the beneficiary Death benefit payment to the beneficiary

Cash value withdrawal to the beneficiary

Karen transfers all rights in her life insurance policy to her brother, David, through an absolute assignment. Who is responsible for paying the policy's premiums from that point forward? David must pay the premiums. The policy is converted to paid-up status and there are no future premiums required. Karen must continue paying the premiums. Premiums are split between Karen and David.

David must pay the premiums.

All the following statements regarding annuities are correct EXCEPT: The insurer guarantees income payments for whatever annuity payout period the annuitant selects. Annuities provide income payments that annuitants cannot outlive even if they surpass their life expectancy. The insurer can provide a guaranteed stream of income for a single life or for a joint life, based on life expectancies and its mortality experience. Deferred annuities are a suitable replacement for life insurance.

Deferred annuities are a suitable replacement for life insurance.

All the following statements regarding an employer's group life insurance plan are correct EXCEPT: The amount of insurance coverage provided for each employee is typically some percentage of his or her salary. The employees are the insured individuals. Employee contributions are not permitted. The employer owns the master policy.

Employee contributions are not permitted.

All the following statements regarding the disclosure that must be made with accelerated benefits riders are correct EXCEPT: The disclosure must explain the effect paying accelerated benefits will have on the policy's cash value, death benefit, premium, and policy loans. The disclosure must provide a brief description of accelerated benefits and definitions of conditions triggering payment of benefits. Some states require that the disclosure must note that receiving accelerated benefit payments may adversely affect the recipient's eligibility for Medicaid or other government benefits. Insurers are required to provide a disclosure statement to the applicant only when an accelerated benefit payout is requested.

Insurers are required to provide a disclosure statement to the applicant only when an accelerated benefit payout is requested.

Which of the following most correctly describes death benefit Option 1 of a universal life insurance policy? It has a rising death benefit, equal to the cash value and a level net amount at risk. It has a fluctuating death benefit, equal to the cash value and a net amount at risk that may rise or fall. It has a level death benefit, equal to the cash value and a net amount at risk that decreases at the same rate that the cash value increases. It has a decreasing death benefit, equal to the cash value and a net amount at risk that decreases more than the cash value increases.

It has a level death benefit, equal to the cash value and a net amount at risk that decreases at the same rate that the cash value increases.

What typically happens to the face amount of an indexed whole life insurance policy over time? It increases every year at the same rate as the national inflation rate. It increases annually to reflect increases in the consumer price index. It increases annually as long as the insured continues to prove insurability. It increases annually based on a fixed rate specified in the policy.

It increases annually to reflect increases in the consumer price index.

How is interest (or investment growth, in the case of variable annuities) that accumulates in a non-corporate-owned deferred annuity taxed? It is taxed in the year credited to the annuity. It is never taxed. It is taxed when it is distributed, whether as a withdrawal or through annuitization. It is taxed when distributed through a withdrawal, but it is tax free if the contract is annuitized.

It is taxed when it is distributed, whether as a withdrawal or through annuitization.

Who is the contingent beneficiary in the following beneficiary designation: "Sally Grant, wife of the insured, if she survives the insured; otherwise Jim Grant, son of the insured, if he survives the insured; otherwise Frank Grant, brother of the insured." the insured's estate Jim Grant Sally Grant Frank Grant

Jim Grant

All of the following statements regarding joint life insurance and survivorship life insurance are correct EXCEPT: Survivorship life insurance pays the death benefit upon the death of the second insured. Both joint life and survivorship life have a lower premium than two comparable individual policies covering the two insureds. Joint life insurance is especially popular in the estate planning market. Joint life insurance lets the surviving insured purchase an individual policy without having to prove insurability upon the first insured's death.

Joint life insurance is especially popular in the estate planning market.

As a general rule, insurers do not pay death benefits to designated beneficiaries who are minors because: The risk is too great that an adult will take advantage of the minor. Minors are incapable of managing large sums of money. Minors do not have the legal capacity to sign a binding receipt for the funds. Federal law limits the amount of money that may be paid to a minor.

Minors do not have the legal capacity to sign a binding receipt for the funds.

All the following statements about "other insured" term riders on a life insurance policy are correct EXCEPT: Only spouses or partners can be covered under this rider. The term life coverage provided by the rider is temporary. Applicants often purchase this rider to cover their spouse or partner. Coverage ends when the policyowner reaches a specified age such as 65 or 70.

Only spouses or partners can be covered under this rider.

All of the following statements about the fixed amount life insurance settlement option are correct EXCEPT: Payments must be made on a monthly basis. If the payee dies before the principal reaches zero, the insurer pays the contingent payee until the account is depleted. The contingent payee can also choose to receive the present value of the final payments in a lump sum. The policyowner or beneficiary selects the payment amount. This payment amount determines how long the payments continue. The insurer holds the proceeds under this option. The insurer then pays out the proceeds (including interest) on a schedule until the principal is exhausted.

Payments must be made on a monthly basis.

Cindy and Rich each bought a $100,000 universal life insurance policy from the same insurer, each with a ten-year back-end surrender charge schedule. In year two, Cindy withdrew $5,000 from her policy. Rich withdrew $5,000 from his policy in year five. Which of the following statements is most correct regarding surrender charges they may face? Cindy and Rich will pay the same surrender charge. Rich will have a lower surrender charge than Cindy. Neither Cindy nor Rich will pay a surrender charge. Cindy will have a lower surrender charge than Rich.

Rich will have a lower surrender charge than Cindy.

Which of the following sections of the Tax Code deals with the exchange of life insurance policies and annuities? Section 1035 Section 403(b) Section 401(k) Section 501(c)(3)

Section 1035

Grace owns a fixed annuity and wants to exchange it for a variable annuity. What must she use to be sure no taxes are imposed? Section 1035 exchange an annuity exchange a qualified conversion a free exchange

Section 1035 exchange

What is the only restriction on naming an annuitant? The annuitant must be related to the owner. The annuitant must be a natural person. The annuitant must not be related to the owner. The annuitant can be a natural or non-natural person.

The annuitant must be a natural person.

Which of the following statements correctly describes the relationship, if any, between the application and the insurance contract? The application is part of the entire contract. The application is not part of the contract, but statements made on it can be used to void the contract if they are found to be misrepresentations. The application is not a part of the contract, and once the policy is issued, nothing on it can be used to void the contract. The application is the entire contract.

The application is part of the entire contract.

All of the following statements about indexed life insurance are correct EXCEPT: Interest credited to an indexed UL policy's cash value is tied to changes in an equity index like the S&P 500. Indexed universal life insurance offers potentially higher rates of return than those offered by traditional life insurance policies. The insured bears all of the investment risk with an indexed life insurance policy. There is both a whole life and a universal life version of indexed life insurance.

The insured bears all of the investment risk with an indexed life insurance policy.

Which of the following statements about the tax treatment of funds received through a qualified viatical settlement is correct? The insured pays no federal income tax but may have to pay state income tax. The insured pays capital gains tax but no federal or state income tax. The insured pays state income tax but no federal income tax. The insured pays no taxes in any form.

The insured pays no federal income tax but may have to pay state income tax.

All the following statements about variable annuity sub-accounts are correct EXCEPT: If sub-accounts perform well, the contract owner is likely to realize a greater investment growth than possible with a fixed annuity. The insurer selects the variable sub-accounts to which the contract owner's premiums are allocated. Sub-accounts can range from conservative money-market portfolios to moderate corporate bond portfolios to risky and aggressive international and sector stock portfolios. Variable annuities today may offer up to 20 or 30 different sub-accounts.

The insurer selects the variable sub-accounts to which the contract owner's premiums are allocated.

Which of the following will happen if the outstanding balance of a whole life insurance policy loan, including accrued interest, ever exceeds the policy's cash value? The policy will remain in effect. The policy will be surrendered for cash. The policy will automatically go on the extended term option. The insurer will cancel the policy.

The insurer will cancel the policy.

Andrea bought a $300,000 term-to-age-55 policy. All the following statements about her policy are correct EXCEPT: It is possible that Andrea could convert the term policy to a life insurance policy that provides coverage for Andrea's entire life even if she becomes uninsurable. The policy provides $300,000 of coverage until Andrea reaches age 55. The premium for the policy stays the same until the policy expires. The policy will generate a cash value that is payable at age 55.

The policy will generate a cash value that is payable at age 55.

Once annuitized income payments begin, which of the following statements is correct? The annuitant can change the settlement option at any time. The settlement option cannot be changed. The annuitant can change the settlement option before the first payment is distributed. The annuitant can change the settlement option at any time during the first two years only.

The settlement option cannot be changed.

When an employee retires, what is the general income tax treatment of the benefit payments he or she receives under a deferred compensation plan? They are entirely tax free. They are partially tax free. They are fully taxable. They are taxable but the employee can also take a deduction on them, making them essentially tax free.

They are fully taxable.

Which one of the following statements about variable life insurance is correct? Variable life insurance policyowners can transfer funds between investment subaccounts and the insurer's general account. The death benefit under a variable life insurance policy will never be more than the stated minimum. Variable life insurance policies do not guarantee a minimum death benefit. With variable life insurance, it is the insurance company that assumes most of the investment risk.

Variable life insurance policyowners can transfer funds between investment subaccounts and the insurer's general account.

Tax law considers any limited payment life insurance policy that is paid-up in seven years or less to be which of the following? an endowment policy a modified endowment contract a modified premium whole life policy an insured security

a modified endowment contract

Term life insurance is well suited for all the following needs EXCEPT: protection while the family children are living at home or attending college a source of emergency cash for any financial need mortgage protection inexpensive protection until the policyowner can afford permanent life insurance

a source of emergency cash for any financial need

In accordance with Section 1035 of the Tax Code, a deferred fixed annuity may be exchanged on a tax-free basis for all the following types of products EXCEPT: a tax-qualified long-term care insurance policy a deferred variable annuity an immediate fixed annuity a whole life insurance policy

a whole life insurance policy

The terms "double indemnity rider" and "triple indemnity rider" are common names for which type of life insurance policy rider? accidental death benefit rider return of premium rider cost-of-living rider guaranteed insurability rider

accidental death benefit rider

A "jumping juvenile" whole life insurance policy typically increases its face amount when the insured reaches: age 18 age 26 age 21 age 16

age 21

Social Security's full retirement age (FRA), currently age 66, will gradually rise to what age for workers born in 1960 or later? age 70 age 66 and 2 months age 67 age 72

age 67

Under the integrated long-term care option, the beneficiary receives the remainder of the face amount as the death benefit at the insured's death. In this way, the long-term care integrated option is similar to which of the following? a disability income benefit rider term life insurance a family term rider an accelerated benefits rider

an accelerated benefits rider

An insurance producer tells a life insurance applicant that he has the authority to waive the medical exam that is normally required by the insurer with every application. The insurer may be required to accept the application without a medical exam due to the producer's: imputed authority apparent authority express authority implied authority

apparent authority

In an absolute assignment, what term is used to describe the new policyowner? insured beneficiary assignee assignor

assignee

The period after the youngest child turns age 16, during which no Social Security benefits are payable to a surviving spouse until he or she reaches age 60, is called the: blackout period survivor period dependency period early retirement period

blackout period

A producer owes a fiduciary duty to: neither the insurer nor the customer the insurer only both the insurer and the customer the customer only

both the insurer and the customer

Jerry asks his insurance company to pay him the cash value of his permanent life insurance and cancel the policy. Jerry is using which of the following nonforfeiture options? extended term option policy loan and withdrawal provision cash surrender option reduced paid-up insurance option

cash surrender option

Which rider gives the policyowner the option to increase his or her life insurance policy's face amount based on an inflation index? accelerated benefits rider guaranteed insurability rider cost-of-living rider accidental death benefit rider

cost-of-living rider

Premium rates will vary unpredictably depending on the insurer's actual experience in which one of the following types of whole life insurance? graded premium whole life straight whole life current assumption whole life limited pay whole life

current assumption whole life

John would like to buy life insurance to provide for his family in case he dies prematurely. Using the needs approach to answer this question, his producer will gather all the following pieces of information, EXCEPT: current income assets and liabilities economic value risk profile

economic value

When calculating the ongoing income that a surviving family will need after an insured dies, the insured must consider all of the following expenses EXCEPT: family medical expenses utilities housing expenses final funeral expenses

final funeral expenses

Which of the following requires monthly fixed premium payments of a specified amount, produces a predetermined amount of income upon annuitization, and has traditionally been used to supplement retirement income? immediate annuity single-premium deferred annuity fixed premium deferred annuity flexible premium deferred annuity

fixed premium deferred annuity

Variable life insurance policies offer all of the following EXCEPT: a guaranteed death benefit a variety of investment subaccount choices a cash value flexible premium payments

flexible premium payments

In a front-end loaded universal life contract, when does the insurer deduct a charge to cover the costs of administering the policy? from the cash value after the premium has been deposited to it from the premium payment before it is credited to the policy's cash value once, when the first premium is paid at the start of each policy year

from the premium payment before it is credited to the policy's cash value

Barbara is an employee who has group life coverage through her employer. Which of the following most likely describes the type of policy covering Barbara? a group endowment contract group decreasing term life insurance group annually renewable level term life insurance group limited payment whole life insurance

group annually renewable level term life insurance

If a market-value adjusted annuity (MVA) is surrendered before the end of the contract term at a time when current market interest rates are lower than they were when the annuity was issued, the insurer will: maintain the same interest rate on the withdrawn funds and charge the normal surrender charge maintain the same interest rate on the withdrawn funds and reduce the normal surrender charge increase the interest rate on the withdrawn funds and charge the normal surrender charge decrease the interest rate on the withdrawn funds and charge the normal surrender charge

increase the interest rate on the withdrawn funds and charge the normal surrender charge

All the following are possible variations of a joint and survivor annuity settlement option EXCEPT: joint and two-thirds survivor option joint and one-half survivor option joint and 100 percent survivor option joint and 200 percent survivor option

joint and 200 percent survivor option

Using a deferred annuity for short-term accumulation goals may result in all the following consequences EXCEPT: a possible penalty tax upon distribution possible surrender charges upon distribution income taxation of the interest earnings upon distribution loss of accrued interest earnings upon distribution

loss of accrued interest earnings upon distribution

Under which of the following settlement options are the insurer's responsibilities under the contract fulfilled upon the death of the insured? lump-sum cash payment interest only fixed period fixed amount

lump-sum cash payment

Under which of the following settlement options does the insurer distribute all the proceeds upon the death of the insured or surrender of the policy, with none held by the insurer? lump-sum cash payment fixed amount fixed period interest only

lump-sum cash payment

Social Security does NOT provide benefits for retirement disability medical care death

medical care

Any permanent life insurance that fails the Tax Code's definition of life insurance due to excessive funding is called a(n) deferred contract nonqualified policy modified endowment contract modified policy

modified endowment contract

What is the standard life insurance policy suicide exclusion period? one to two years 18 months three years four years

one to two years

Regarding policy dividends, which type of insurance is used with the so-called fifth dividend option? extended-term insurance one-year term life insurance one-year permanent insurance renewable term insurance

one-year term life insurance

Billy, age 10, is insured under a juvenile life insurance policy purchased by his father, who pays the premiums. Which of the following would ensure that the insurance stays in force if the father dies or becomes disabled? waiver of premium rider disability income benefit rider payor benefit rider waiver of monthly deductions rider

payor benefit rider

Which of the following is NOT a standard life insurance nonforfeiture option? extended term insurance policy loans reduced paid-up insurance cash surrender

policy loans

A policyowner who lapses his whole life policy and applies its cash value to buy paid-up whole life coverage has chosen which of the following? extended term option cash surrender and withdrawal provision cash surrender option reduced paid-up option

reduced paid-up option

Under which nonforfeiture option does permanent life insurance continue in force with no further need for premiums? extended term option partial surrender provision cash surrender option reduced paid-up option

reduced paid-up option

Although persons may begin receiving Social Security retirement benefits as early as age 62, their benefits are reduced until they are 65 years old reduced until they reach full retirement age increased when they are 70 years old permanently reduced

reduced until they reach full retirement age

The basic purpose for the re-entry option with a renewable term life insurance policy is to let the policyowner: reinstate the policy after it has lapsed for nonpayment of premiums without having to provide evidence of insurability convert the term policy to a permanent life insurance policy renew the policy at lower current rates rather than guaranteed renewal rates renew the policy with a higher face amount without having to provide evidence of insurability

renew the policy at lower current rates rather than guaranteed renewal rates

To be considered currently insured, a worker must have earned how many quarters of coverage in the 13-quarter period before he or she dies? 13 six 40 one for each year since turning age 21

six

What is the maximum amount of time most states allow insurers to delay paying cash surrender values? one week one month nine months six months

six months

Julie is the beneficiary of her husband's $150,000 life insurance policy. When he dies, she chooses a settlement option that will pay monthly benefits to her as long as she lives, and will cease when she dies, with no further payments owed to anyone. Julie has chosen which settlement option? straight life income settlement option life income with refund life income with period certain joint and survivor life income

straight life income settlement option

An insurer may recoup acquisition fees associated with the sale and administration of universal life insurance by assessing a cash value withdrawal fee called a(n): index charge premium charge mortality charge surrender charge

surrender charge

The insurance coverage provided under a temporary insurance agreement (or receipt) is: whatever type of life insurance was applied for term insurance whole life insurance not insurance coverage at all, but the insurer's general account assets

term insurance

What is the only part of a nonqualified annuity's death benefit that is taxable? the full death benefit the amount that exceeds the contract's gain. the amount that exceeds the amount the owner paid into the contract the amount that exceeds the annuitant's cost basis

the amount that exceeds the amount the owner paid into the contract

Wilson buys life insurance but commits suicide three years later. Wilson's beneficiary will get which of the following from the insurer? a return of premiums paid, plus interest the full death benefit nothing a return of the premiums paid

the full death benefit

The basic agreement between the insured and the company, stating the company's promise to pay the policy's face amount (the death benefit) to the named beneficiary, is contained in which part of the life insurance policy? the incontestability clause the application the insuring clause the entire contract provision

the insuring clause

Under which one of the following circumstances are funds related to life insurance policy dividends taxable? when used to buy additional insurance when used to reduce premiums when paid in cash to a policyowner the interest earned on dividends left with the insurer to accumulate interest

the interest earned on dividends left with the insurer to accumulate interest

Sue, an annuity owner, names her 15-year-old son and 10-year-old daughter as joint annuitants of her contract. Upon whose life (or lives) are income payments determined? the joint life expectancy of Sue's son and daughter Sue's daughter's life Sue's son's life Sue's life

the joint life expectancy of Sue's son and daughter

What do most insurance producers use today to determine a prospective customer's life insurance needs? financial loss analysis the human life value approach the needs approach cost-benefit analysis

the needs approach

Eligibility for OASDI benefits is determined on the basis of: the number of quarters of coverage the worker has earned a worker's economic need the number of dependents a worker has the worker's age

the number of quarters of coverage the worker has earned

Unlike traditional fixed interest UL policies, many variable universal life policies offer a third death benefit option, which provides a guaranteed minimum death benefit equal to: the policy's net amount at risk plus its cash value plus the sum of premiums paid the policy's net amount at risk plus its cash value minus the sum of premiums paid the policy's net amount at risk plus the greater of the actual cash value or the sum of premiums paid the policy's net amount at risk plus its cash value

the policy's net amount at risk plus the greater of the actual cash value or the sum of premiums paid

If a variable universal life policyowner chooses death benefit Option 3, what will the guaranteed minimum benefit equal? the policy's net amount at risk plus the greater of total premiums paid or the policy's cash value the policy's net amount at risk plus its cash value plus the sum of premiums paid the policy's net amount at risk plus its cash value minus the sum of premiums paid the policy's net amount at risk plus its cash value

the policy's net amount at risk plus the greater of total premiums paid or the policy's cash value

When paying death benefits, life insurance companies must consider all of the following, EXCEPT: the succession of beneficiaries the relationship between the insured and beneficiary the order of beneficiaries and their succession the share of the death benefits that goes to each beneficiary, if the insured has named more than one

the relationship between the insured and beneficiary

What is the main purpose of key person insurance? to provide retirement benefits to key employees to compensate the key employee's family when he or she dies to add to an employee's salary at retirement to compensate the business for the loss of its key employee

to compensate the business for the loss of its key employee

Which of the following statements best describes the purpose of the annuity payout period? to distribute funds in the form of guaranteed periodic payments over a specified number of years not to exceed ten years to distribute funds in the form of guaranteed periodic payments over a time period selected by the annuity owner to distribute funds in the form of periodic payments over a time not to exceed the annuitant's age of 120 years to distribute funds in the form of guaranteed periodic payments over a time period selected by the insurance company

to distribute funds in the form of guaranteed periodic payments over a time period selected by the annuity owner

Where are the policy premiums for a traditional fixed interest universal life policy credited? to the policy's death benefit to the insurance company's reserves to the policy's cash value to a separate account managed by the insurer.

to the policy's cash value

Which of the following contract characteristics is unique to insurance contracts but NOT all contracts? competent parties unilateral legal purpose consideration

unilateral

Under the integrated long-term care option, what percentage of the base policy's face amount can be used for long-term care expenses? up to 25 percent, depending on the insurer up to 50 percent, depending on the insurer up to 75 percent, depending on the insurer up to 100 percent, depending on the insurer

up to 75 percent, depending on the insurer

The requirement that an insurable interest must exist when life insurance is purchased is intended to prevent people from doing which of the following? using life insurance to fund future cash needs overusing life insurance using life insurance as a speculative investment on another person's life designating an ineligible person as the policy beneficiary

using life insurance as a speculative investment on another person's life

Which of the following contracts is not protected by the Washington Life and Disability Insurance Guaranty Association? whole life insurance variable annuities annuities term life insurance

variable annuities

What is another name for the insured in a viatical settlement? viatical settlement provider viator viatical settlement broker viatical settlement purchaser

viator

A rider that waives all monthly deductions from a UL policy's cash value but credits nothing to the cash value if the insured becomes totally disabled is called a: waiver of stipulated premium rider waiver of premium rider waiver of cost of insurance rider waiver of monthly deductions rider

waiver of monthly deductions rider

With a survivorship life insurance policy, the insurer pays the death benefit: only when the older of the two insureds dies only when the younger of the two insureds dies when the surviving spouse dies when either of the insureds dies first

when the surviving spouse dies

Which of the following is NOT a power or duty of the Washington Insurance Commissioner? holding hearings examining insurers at least once every five years approving insurers' forms and rates writing insurance code provisions

writing insurance code provisions

Which of the following statements about the producer's role as a fiduciary is NOT correct? A producer may not commingle premium funds with personal funds. The producer must account for premiums received or delivered. A producer who uses funds that belong to another commits theft. A producer may apply limited premium funds to pay reasonable business expenses.

A producer may apply limited premium funds to pay reasonable business expenses.

All the following statements regarding life insurance cost comparison methods are correct EXCEPT: Cost indexes are used to compare the cost of two or more life insurance policies. All cost comparison methods recognize the role of the cash value in projecting future costs of coverage. Cost indexes calculate the cost of pure insurance protection over a specified period of time. There are two common cost indexes in use today.

All cost comparison methods recognize the role of the cash value in projecting future costs of coverage.

Bob bought a $100,000 ten-year level term insurance policy on March 1, 2012. What will happen if he dies on April 1, 2022? The beneficiary of Bob's policy will be entitled to the policy's cash value but not the death benefit. The beneficiary of Bob's policy will be permitted to pay a one-month premium to extend the policy coverage to April 1, 2022, in which case he or she would be entitled to the $100,000 death benefit. The beneficiary of Bob's policy will get $100,000. Bob's beneficiary will not get any benefits.

Bob's beneficiary will not get any benefits.

All of the following are automatically deemed to represent an insurable interest EXCEPT: Frank (the applicant) and his elderly neighbor Sue (the applicant) and her husband ABC Corp. (the applicant) and its key executive Karen (the disabled applicant, age 28), and her father who cares for her.

Frank (the applicant) and his elderly neighbor

All the following statements regarding stranger-owned life insurance (STOLI) are correct EXCEPT: STOLI is financed through premium loans during the first several years, until it is transferred from the insured to the investors. The insured retains the right to designate the policy's beneficiary. STOLI and investor-owned life insurance (IOLI) are the same thing. STOLI is an arrangement in which investors convince an individual to purchase a life insurance policy on himself which is transferred to the investor in exchange for a sum of money.

The insured retains the right to designate the policy's beneficiary.

Alex sold an insurance policy before his license lapsed and earned a commission on the sale. Is he entitled to a commission if the policy is renewed? No, because he is no longer licensed. No, because only one commission can be paid on a policy sale. Yes, because he was licensed when the policy was sold. Yes, because his license was not revoked or suspended.

Yes, because he was licensed when the policy was sold.

How is increasing term life insurance normally sold? as an endorsement as a rider attached to a permanent life insurance policy as a permanent insurance policy as a stand-alone term life insurance policy

as a rider attached to a permanent life insurance policy

Permanent life insurance can also provide funds, through its cash value, that may be used during the insured's lifetime. What is that feature called? living benefits capital accumulation the money feature permanent values

living benefits

All of the following must sign life insurance applications, EXCEPT: the beneficiary the agent the applicant the insured (if not the applicant)

the beneficiary

Under group insurance coverage, one policy covers a number of people. Who owns these group polices? the organization that represents the group and which sponsors the coverage representatives of the sponsoring companies the insurance company who issues the policy the insureds

the organization that represents the group and which sponsors the coverage

Deliberately withholding material facts when applying for insurance is called: concealment collusion twisting waiver

concealment

The activities a producer performs to support the insurance company in learning all it can about the applicant when seeking applications for insurance are generally called: agency development field underwriting fiduciary process due diligence

field underwriting

Jenny directed $2,500 of her premium deposit to an aggressive technology stock sub-account. At the time of her original deposit, the value of an accumulation unit in that sub-account was $25. Jenny bought 100 units. Two months later, the value of each of those units dropped to $15. What is Jenny's investment in the technology stock account now? $1,500 $1,200 $5,000 $2,500

$1,500

Kate bought a universal life policy with a $200,000 death benefit and chose death benefit Option 1. In year five of the policy, she withdrew $50,000 from the policy's cash value. If she dies shortly after withdrawing the $50,000, what will her beneficiary receive? $50,000 $200,000 $150,000 $250,000

$150,000

How long is the typical permanent life insurance policy's free-look period? 5 days 15 days 10 days 30 days

10 days

When does the free-look period for a variable life insurance policy end? 30 days after the policy is delivered 7 days after the policy is delivered 10 days after the policy is delivered, or 45 days after the insurance application is completed, whichever is later 21 days after the policy is delivered

10 days after the policy is delivered, or 45 days after the insurance application is completed, whichever is later

When Gary bought an indexed annuity with a $10,000 premium deposit, the S&P 500 Index was at 1000. At the end of the contract's first term one year later, this index was at 1100. Based only on this information, what is the basis for the amount of interest credited to Gary's contract? 15 percent 10 percent 20 percent 5 percent

10 percent

Which of the following correctly describes the basic tax treatment of deferred annuity death proceeds paid out before the contract is annuitized? A portion of the death benefit, essentially representing the sum of premiums paid into the annuity, is taxable. The full death benefit is taxable. The full death benefit is tax free. A portion of the death benefit, essentially representing the interest earned by the annuity, is taxable.

A portion of the death benefit, essentially representing the interest earned by the annuity, is taxable.

Which of the following best explains why Section 1035 of the Tax Code does NOT permit a tax-free exchange of an annuity for a life insurance policy? Allowing a tax-free exchange of an annuity for life insurance would enable taxable annuity gain to escape taxation via the life insurance death benefit. Allowing a tax-free exchange of an annuity for life insurance would jeopardize the financial strength of insurance companies. Allowing a tax-free exchange of an annuity for life insurance would result in the life insurance death benefit becoming taxable. The IRS wants to encourage people to own annuities, not life insurance.

Allowing a tax-free exchange of an annuity for life insurance would enable taxable annuity gain to escape taxation via the life insurance death benefit.

If a Social Security benefit recipient has income from other sources, including wages and investment earnings, what percentage of Social Security benefits exceeding a combined income threshold may be income taxable? Up to a maximum of 50 percent of Social Security benefits will be subject to income taxation. Anywhere from 50 percent to 85 percent of Social Security benefits will be subject to income taxation. All of his or her Social Security benefits will be subject to tax. Social Security benefits are never taxable, regardless of the amount of combined income earned.

Anywhere from 50 percent to 85 percent of Social Security benefits will be subject to income taxation.

Andrea owns a variable universal life insurance policy and would like to stop making premium payments for several years while her son attends college and resume them when he graduates. Regarding her policy, which of the following statements is most correct? Andrea can increase or decrease premium payments under her policy but cannot stop making payments altogether. As long as the policy's cash value covers the monthly deductions for the cost of insurance and expenses, Andrea's policy will remain in force. Andrea's policy will lapse. Andrea can stop making premium payments while her son is in college as long as she makes up the missed payments later.

As long as the policy's cash value covers the monthly deductions for the cost of insurance and expenses, Andrea's policy will remain in force.

Barb, age 40, buys a ten-pay life policy while Jill, age 40, buys a life paid up at age 65 policy. All other factors being equal, which of the following statements is most correct? Jill will pay a higher monthly premium than Barb, and their policies will mature at about the same time. Barb and Jill will pay approximately the same monthly premium amount every year, but Barb's policy will mature before Jill's. Barb and Jill will pay approximately the same monthly premium amount every year, and their policies will mature at about the same time. Barb will pay a higher monthly premium over a shorter time than Jill, and their policies will mature at about the same time.

Barb will pay a higher monthly premium over a shorter time than Jill, and their policies will mature at about the same time.

What impact will a worker's decision to begin receiving OASDI retirement benefits at age 69 have on his or her retirement benefit amount? Benefits will be no different than the PIA at the worker's FRA. Benefits will be higher than the PIA at the worker's FRA. Benefits will be either higher or lower than the PIA at the worker's FRA, depending on the worker's average indexed monthly earnings (AIME). Benefits will be lower than the PIA at the worker's full retirement age (FRA).

Benefits will be higher than the PIA at the worker's FRA.

What will happen if a person starts receiving Social Security retirement benefits before reaching his or her full retirement age and continues to work and earn money that exceeds specified earnings limits? Benefits will not be affected. Benefits will be increased. Benefits will be permanently reduced. Benefits will be reduced each year until the worker attains full retirement age.

Benefits will be reduced each year until the worker attains full retirement age.

Variable life and variable universal life insurance are similar in all of the following ways EXCEPT: Both require fixed, set premiums. Both offer a death benefit that varies based on the performance of the subaccount investments. Both let the policyowner put funds in investment subaccounts. Both are considered securities.

Both require fixed, set premiums.

All of the following statements comparing whole life insurance and term life insurance are correct EXCEPT: Both whole life and term life insurance have level premiums, but only whole life guarantees a level premium for as long as the insured lives. Both whole life insurance and term life insurance build a cash value. Only term life insurance has a renewal provision. Term life insurance is designed for temporary needs while whole life insurance is designed to cover the insured's entire life.

Both whole life insurance and term life insurance build a cash value.

Dave receives Social Security retirement benefits. His wife Cathy is still working. Which statement about Cathy's Social Security spousal benefit is CORRECT? Cathy must be at least age 65 to receive the benefit. Cathy's benefit is 100 percent of Dave's paid-in allowance (PIA). Cathy can claim the benefit because she is still working. Cathy can choose either the spousal benefit or the worker's benefit.

Cathy can choose either the spousal benefit or the worker's benefit.

All of the following statements regarding the extended term nonforfeiture option are correct EXCEPT: If the extended term option is elected, the face amount of the term policy is the same as the face amount of the lapsed policy. Coverage under the extended term insurance option continues for the insured's entire life. An extended term option allows the policyowner to have insurance coverage for some period with no further premium payments required. The extended term option is not available if the original policy was issued on a substandard (rated) basis.

Coverage under the extended term insurance option continues for the insured's entire life.

Which statement regarding an insurer's general account is correct? Insurers try to achieve a balance in their general account investments, allocating half to risky investments and half to extremely conservative interest-bearing accounts. General account funds are invested only in safe, secure long-term assets such as U.S. government securities, blue-chip dividend-producing stocks, and investment-grade bonds. General account funds are invested only in the most conservative assets available, such as bank savings accounts and CDs. Insurers invest a large percentage of their general account funds in risky investments that offer the potential of higher returns.

General account funds are invested only in safe, secure long-term assets such as U.S. government securities, blue-chip dividend-producing stocks, and investment-grade bonds.

Gina owns a $200,000 five-year renewable term insurance policy and wants to renew the policy at the end of the term. In this case, all the following statements are correct, EXCEPT: The insurer will base the premium for the renewal coverage on Gina's age at the time of renewal. Gina will be able to renew the policy any time before the policy expires. Gina must prove insurability before the insurer can renew the policy. The policy may prohibit policy renewals beyond a certain age, such as 65 or 70.

Gina must prove insurability before the insurer can renew the policy.

Which of the following most accurately describes "insurable interest" in a life insurance policy? Insurable interest is the primary factor in determining how much life insurance the insurer will issue on a person. Insurable interest is the financial relationship at the time of application between the person applying for life insurance and the person whose life is to be insured. Insurable interest is the relationship between the person applying for insurance and the insured at the time of the insured's death. Insurable interest is the relationship between the person paying for the insurance and the designated beneficiary.

Insurable interest is the financial relationship at the time of application between the person applying for life insurance and the person whose life is to be insured.

If insurers do not allow minors to be beneficiaries of life insurance, what happens if no adults are available to receive death benefits? Insurers hold the proceeds in trust until the child reaches maturity. Insurers require the court to appoint a legal guardian before paying benefits to a minor child. Each state treats these situations differently. The state receives the funds and holds them in escrow until the child is age 21.

Insurers require the court to appoint a legal guardian before paying benefits to a minor child.

Which of the following most accurately describes who can be a life insurance policy beneficiary? The beneficiary can be anyone as long as it is a natural person. It can be virtually any person or entity the policyowner chooses. The beneficiary must have an insurable interest in the insured. The beneficiary must be a blood relative of the insured.

It can be virtually any person or entity the policyowner chooses.

All the following statements regarding term life riders covering additional insureds are correct EXCEPT: Term insurance is used to provide the additional insured coverage. The additional insured rider covers individuals other than the base policy's insured. Coverage usually ends when the policyowner reaches age 65 or 70. It is not necessary for the policyowner to have an insurable interest on the insured who is covered under the additional insured rider.

It is not necessary for the policyowner to have an insurable interest on the insured who is covered under the additional insured rider.

Which of the following statements correctly describes the accidental death benefit (ADB) rider on a life insurance policy? It pays benefits only in the event of accidental death. It pays benefits if the insured dies as result of an accident or a self-inflicted injury. It pays benefits if the insured dies unexpectedly as result of an accident or a sudden illness. It pays benefits if the insured suffers a disabling injury, permanent dismemberment, or death resulting from an accident.

It pays benefits only in the event of accidental death.

Ralph, Jerry, and Paula are primary and equal beneficiaries of the $600,000 insurance policy on the life of their mother, Judy. Ralph dies before his mother. He leaves two children, Tim and Hal. Judy's life insurance policy designates the death benefit per capita. How will the insurer distribute the policy benefits? Jerry and Paula will each receive $300,000 Ralph's $200,000 share will pass equally to his two children when Judy dies. Jerry, Paula, Tim, and Hal will divide the benefits equally among them. Tim and Hal will divide the death benefit between them.

Jerry and Paula will each receive $300,000

All the following statements about life insurance beneficiary designations are correct EXCEPT: Non-human entities, such as trusts and corporations, cannot be beneficiaries of individual life insurance. Beneficiaries get the policy's proceeds after the insured dies. A policyowner can choose a natural person such as a spouse, a child, or children as beneficiaries. Insurance buyers are relatively free to choose the beneficiaries of their policies.

Non-human entities, such as trusts and corporations, cannot be beneficiaries of individual life insurance.

Which of the following statements about backdating life insurance applications is correct? Backdating has no impact on the policy's premium, but it does result in the policy being issued with a cash value. Only the insurance company, not the producer, can authorize the backdating of specific applications. The purpose for backdating an application is to qualify for a better underwriting classification. Insurers normally allow an applicant to backdate a policy by up to 2 years.

Only the insurance company, not the producer, can authorize the backdating of specific applications.

In Washington, which of the following persons is not considered an insurance producer? Mickey, who negotiates insurance contracts Maureen, who sells life insurance Richard, who sells variable annuities Sven, who brokers surplus lines contracts

Sven, who brokers surplus lines contracts

Carl is owner and insured of a life insurance policy. If he were to die without having selected a settlement option, which of the following option(s) is available to the beneficiary? The beneficiary may choose from all settlement options that would have been available to Carl. The beneficiary must choose a settlement option that does not include a life contingency. The beneficiary must take the cash value as a lump-sum payment only. The beneficiary must leave the cash value with the insurer to accumulate interest for a period specified in the policy.

The beneficiary may choose from all settlement options that would have been available to Carl.

All the following statements about ordinary (or straight) whole life insurance are correct EXCEPT: The insured pays level premiums for life. The policy death benefit remains level. The cash value remains level throughout the life of the policy. The premium level is higher than the actual mortality costs during the early years of the policy.

The cash value remains level throughout the life of the policy.

The exclusion ratio applies until all principal in the annuity contract has been paid out. After that, what happens? The full amount of future annuity payments is treated as taxable income. The annuity contract is canceled. The annuity will be paid up, and no further taxes will apply. The full amount of future annuity payments is income tax free.

The full amount of future annuity payments is treated as taxable income.

A policyowner owns a variable universal life insurance policy that offers a wide array of variable subaccounts. With respect to this policy, all of the following statements are correct EXCEPT: Cash value funds can be transferred from one subaccount to another without income tax consequences. The variable subaccounts allow policyowners to participate in the investment performance of the assets underlying their contracts. Subaccount funds are not guaranteed by the insurer. The insurance company bears the investment risk for funds allocated to variable subaccounts.

The insurance company bears the investment risk for funds allocated to variable subaccounts.

The facility of payment clause of a life insurance policy, allowing an insurance company to determine who should receive a death benefit payment if a valid beneficiary is not available, could be applied in all the following situations EXCEPT: The sole beneficiary dies before the policyowner and the policyowner did not name a contingent beneficiary. The sole beneficiary is a minor at the time of the insured's death. The sole beneficiary is a charitable organization that no longer exists at the time of the insured's death. The insurer learns, when paying the claim, that the sole designated beneficiary had no insurable interest in the insured at the time of death.

The insurer learns, when paying the claim, that the sole designated beneficiary had no insurable interest in the insured at the time of death.

All the following statements regarding children's term riders in life insurance are correct EXCEPT: The insurer must write separate riders for each child in a family. Children who have not yet reached the limiting age remain covered under the rider while it ends for their older siblings who reach the maximum coverage age. The coverage for any covered child normally ends when he or she reaches a certain age. Depending on the insurer, the age limit for coverage under a children's term rider may be 18, 21, or 25.

The insurer must write separate riders for each child in a family.

Under the interest-only life insurance settlement option, what happens to the death benefit proceeds at the end of the payment period (or upon request by the beneficiary)? The insurer pays the proceeds in a lump sum. The insurer keeps the interest, thus increasing the death benefit amount. The insurer pays the proceeds, either in a lump sum or under one of the other settlement options. The insurer pays the proceeds to the beneficiary.

The insurer pays the proceeds, either in a lump sum or under one of the other settlement options.

All of the following statements regarding the reduced paid-up life insurance nonforfeiture option are correct EXCEPT: A policyowner of a lapsed policy can take the reduced paid-up option regardless of whether the lapsed policy was issued on a standard or substandard (rated) basis. If the lapsed policy was a participating policy, the paid-up policy remains eligible for dividends. The paid-up policy will not build any more cash value. A paid-up policy under the reduced paid-up insurance option requires no further premiums nor can any be paid.

The paid-up policy will not build any more cash value.

Under the life insurance transfer-for-value rule, to what extent are death benefits from a policy sold to another party considered taxable income to the new owner? The taxable portion equals the death benefit minus the sum of the initial purchase price and all subsequent premiums paid by the new owner. The taxable portion equals the death benefit minus the initial purchase price paid by the new owner. The taxable portion equals the death benefit minus the policy's cash value at the time of the transfer. The full death benefit is taxable.

The taxable portion equals the death benefit minus the sum of the initial purchase price and all subsequent premiums paid by the new owner.

Which statement correctly describes the income tax treatment of employer-funded group life insurance coverage on a covered employee? The value of coverage exceeding the employee's adjusted gross income is taxable to the employee; below that, it is tax free. The value of coverage exceeding $50,000 is taxable to the employee; below that, it is tax free. As long as the plan is nondiscriminatory, 100 percent of employer-paid group life coverage is tax free to the employees. The value of the first $50,000 in coverage is taxable to the employee; above that, it is tax free.

The value of coverage exceeding $50,000 is taxable to the employee; below that, it is tax free.

Which statement about deferred compensation plans is correct? They are considered qualified plans. All employees over the age of 21 with at least one year of service must be eligible to participate in the plan. They allow executives to delay receiving current compensation until a future time. Although life insurance is not allowed to fund deferred compensation plans, annuities and mutual funds are allowed.

They allow executives to delay receiving current compensation until a future time.

Which statement is correct about the tax treatment of distributions from endowment policies? They are treated as life insurance proceeds. They are treated as proceeds from modified endowment contracts. They are subject to federal income taxation. They are exempt from federal income taxation.

They are subject to federal income taxation.

When looking at how much income his family would need if he were to die prematurely, Tom discovered that the Social Security survivors' benefit would not give them enough ongoing income. If securing his family's financial future is his top priority, which of the following statements describes Tom's best response? Tom can buy additional life insurance to cover the amount needed to provide an adequate stream of income upon his death. Tom should apply to the Social Security Administration now to ensure that his family will receive higher benefits if he dies. Tom should try to lower his monthly expenses and increase the amount of Social Security withheld from his paychecks to ensure his family will have enough income if he dies. Tom can arrange to have his 401(k) account distribute its account value to his surviving dependents in monthly payments.

Tom can buy additional life insurance to cover the amount needed to provide an adequate stream of income upon his death.

Which one of the following statements about variable life insurance is correct? Variable life policyowners can invest all of their premiums in the insurer's general account. With a variable life insurance policy, the policyowner assumes most of the investment risk. Variable life policyowners can choose flexible premium payment schedules. Subaccounts are managed within the insurer's general account.

With a variable life insurance policy, the policyowner assumes most of the investment risk.

Which of the following is guaranteed under most variable annuity contracts? each sub-account's net asset value level monthly income payments a death benefit, if the owner or annuitant dies before the contract is annuitized a minimum interest rate

a death benefit, if the owner or annuitant dies before the contract is annuitized

A term life insurance policy in which the protection and premium amounts stay the same during the term period is known as: an increasing term policy a renewable decreasing term policy a level term policy a decreasing term policy

a level term policy

The non-working surviving spouse of a worker who is receiving OASDI retirement benefits is entitled to which of the following benefits from Social Security? a monthly benefit equal to the worker's PIA at the spouse's FRA a lump-sum benefit of $255, payable at the spouse's FRA a monthly benefit of 50 percent of the worker's PIA at the spouse's full retirement age (FRA) nothing, since he or she is not paying FICA taxes

a monthly benefit of 50 percent of the worker's PIA at the spouse's full retirement age (FRA)

Life insurance underwriters are most likely to request a consumer (inspection) report on which of the following? all applicants applicants who are seeking very high amounts of life insurance business life insurance applicants who have already been issued high amounts of life insurance applicants whom the agent does not know well

applicants who are seeking very high amounts of life insurance

An endowment policy matures (endows) when its cash value equals its face amount, which may be: only between ages 95 and 120 no earlier than the insured's age 95 at almost any age no earlier than the insured's age 120

at almost any age

The policy value that builds within a whole life insurance policy and is accessible by the policyowner while the insured is alive is called the: face amount death benefit cash value policy reserve

cash value

In a modified endowment contract, the life insurance policy's cash value grows more quickly than is permitted by the Tax Code. This results primarily from which of the following? a policy that is paid up before age 120. the policy's death benefit shrinking excessively large premiums being deposited into the contract during the first seven years or less the policyowner buying two or more policies and combining them

excessively large premiums being deposited into the contract during the first seven years or less

The purpose for the Buyer's Guide, which must be given to every insurance prospect in the first meeting with a producer, is to: provide buyers with details of the insurance policy they are considering for purchase advise the buyer to consider an alternative to the insurance product being considered explain the general features, benefits, and conditions of the type of insurance being considered explain the step-by-step process involved in purchasing the recommended produc

explain the general features, benefits, and conditions of the type of insurance being considered

A not-for-profit insurance provider operated by an organization that has a representative form of leadership, operates on a lodge system, and exists solely for the benefit of its members and their beneficiaries is called a: home service insurance company risk retention group mutual insurance company fraternal insurance company

fraternal insurance company

In a typical life insurance policy, the policyowner is the third party. beneficiary. insurer. insured.

insured.

Under the settlement option that Gary and Fran chose for their father's life insurance, they receive monthly payments until the second payee (survivor) dies. At that point, income payments stop. What option have Gary and Fran chosen? life income with period certain joint and survivor life income straight life income settlement option life income with refund

joint and survivor life income

Many payees worry about choosing the straight life income option because they know that if they die after receiving only a single income payment, the insurer makes no further payment. To address this concern, the insurance industry created which of the following? policy riders for disability life income settlement options guaranteeing that a certain minimum number of payments will be made or a specified minimum amount will be paid settlement options guaranteeing that the amount of each payment is calculated so that the principal plus the interest earned reaches zero at the end of the selected period contingent beneficiary designations

life income settlement options guaranteeing that a certain minimum number of payments will be made or a specified minimum amount will be paid

Actuaries calculate net life insurance premiums based on which of the following? morbidity and interest assumptions interest and expense assumptions mortality and expense assumptions mortality and interest assumptions

mortality and interest assumptions

What type of life insurance company is owned by the policyowners? privately traded company mutual company stock company universal insurance company

mutual company

Regarding policy dividend options, the so-called "fifth dividend option" involves the purchase of: one-year term life insurance equal to the base policy's cash value or the amount that the dividend can purchase permanent life insurance in $1,000 increments additional insurance (determined by the dividend amount) of the same type as the base policy term life insurance in $1,000 increments

one-year term life insurance equal to the base policy's cash value or the amount that the dividend can purchase

A life insurance policy's long-term care rider requires that an insured diagnosed with a cognitive disorder do which of the following to be eligible for benefit payments? provide a physician's certification, obtained within the past 12 months, that his or her health or safety is at risk without supervision demonstrate that his or her health or safety had been at risk at least once within the last 12 months obtain a doctor's statement that he has been mentally disabled for the past 12 months that the mental condition first appeared within the past 12 months

provide a physician's certification, obtained within the past 12 months, that his or her health or safety is at risk without supervision

Which of the following statements regarding the replacement of a life insurance policy is correct? replacing a policy usually results in a lower premium the new policy may be cancellable by the insurer replacing a policy will require the insured to go through a new contestability period replacement can be achieved without requiring the applicant to prove insurability once again

replacing a policy will require the insured to go through a new contestability period

For which of the following purposes are annuities most often used? income protection in the event of death short-term savings retirement planning estate planning

retirement planning

What provision lets a policyowner return a policy for a refund of premiums paid for a certain period of time after the policy is issued? grace period contestability period consideration right to examine (free look)

right to examine (free look)

Which of the following most correctly describes the option(s) available with a universal life insurance policy the owner no longer wishes to maintain? surrender the policy for its cash value, convert it to extended term insurance, or convert it to paid-up whole life insurance surrender the policy for its cash value or let the policy continue without premiums until the cash value can no longer cover monthly deductions surrender the policy for its cash value or convert it to extended term insurance surrender the policy for its cash value or convert it to paid-up whole life insurance

surrender the policy for its cash value or let the policy continue without premiums until the cash value can no longer cover monthly deductions

Annuities offer all the following benefits EXCEPT a death benefit tax-deferred growth during a deferred annuity's accumulation period retirement income the annuitant cannot outlive tax-free distributions upon the annuity owner's death or retirement

tax-free distributions upon the annuity owner's death or retirement

During the underwriting process, a life insurance company may request a medical exam based on any of the following criteria, EXCEPT: the type or amount of the proposed insurance the applicant's race how the applicant answered health questions on the application the age of the applicant

the applicant's race

For a third-party life insurance policy to be valid, insurable interest must exist between the policyowner and the insured when the policy is issued. a claim is filed. the application for insurance is made. the insured dies.

the policy is issued.

Sylvia's insurer guarantees a fixed death benefit for the policy she owns. Based on this, which one of the following benefits is also most likely guaranteed with this policy? her ability to borrow an interest-free loan from the cash value payment of premiums on Sylvia's behalf in the event of emergencies the policy's cash value policy dividends

the policy's cash value

With respect to life and health insurance policies, the term "modal premium" generally refers to the policy's premium amount for each of several different premium payment frequencies the average premium amount for a policy of the proposed type and face amount. The minimum, maximum and recommended premium amount for the policy being purchased the distinction between a fixed premium policy and a flexible premium policy

the policy's premium amount for each of several different premium payment frequencies

Which of the following is an insurable risk? the possibility of one's home value decreasing due to a drop in market prices the possibility of losing money gambling in Las Vegas the possibility of becoming disabled and unable to earn an income the possibility of losing money in stock investments

the possibility of becoming disabled and unable to earn an income

What is the purpose of a life insurance policy's ownership provision? to stipulate that the owner must be a natural person to establish the beneficiary's right to determine how the policy death benefit is paid out to establish the conditions under which the policyowner can exercise certain rights of ownership to establish the terms under which the insurance company can take ownership of the policy

to establish the conditions under which the policyowner can exercise certain rights of ownership

All the following reasons that a business might buy life insurance represent a valid insurable interest, EXCEPT: to insure the lives of key employees or owners to insure liquidity in case one of the owners or key employees dies to insure partners' lives to provide funds to buy out a deceased partner's interest to provide insurance coverage for large-volume customers

to provide insurance coverage for large-volume customers

Which of the following does not constitute the transaction of insurance? insuring a risk mailing an insurance contract soliciting insurance negotiating an insurance contract

mailing an insurance contract

In what form does the MIB present its information to insurers? a posting on the MIB website describing the applicant's medical history a telephone call from a MIB analyst discussing the MIB's findings on the applicant a written report, which includes an underwriting recommendation, detailing the MIB's findings on the applicant numeric codes, indicating risks identified in previous applications, that are communicated electronically

numeric codes, indicating risks identified in previous applications, that are communicated electronically

An insurance transaction can include all of the following activities EXCEPT soliciting insurance. paying premiums. insuring risks. negotiating insurance contracts.

paying premiums.

Who normally owns life insurance that is used to meet business insurance needs? the insured the employees the business jointly with the insured the business

the business

A fraternal benefit society is characterized by all of the following EXCEPT: operation on a for-profit basis absence of capital stock representative form of government operation on a lodge system

operation on a for-profit basis

From an insurance perspective, underwriting is best defined as: the process of determining if an applicant is an insurable risk the process of identifying applicants who are engaging in adverse selection the process of calculating mortality and morbidity charges the process of determining when an applicant will die or suffer a serious illness

the process of determining if an applicant is an insurable risk

A producer who deals directly with the insured and receives compensation from the insured is required to disclose all of the following information EXCEPT: the amount of any commission paid by the insurer the amount of any additional compensation in awards and bonuses the producer's annual income from fees paid by clients the amount of the fee paid by the insured

the producer's annual income from fees paid by clients

John, an insurance producer, receives a request for information from the Commissioner. His written reply is due within how many days after receiving the request? 15 business days 45 business days 3 business days 30 business days

15 business days

In life insurance, for how long must insurable interest exist? If no insurable interest exists when a policyowner buys a life insurance policy, the contract may still be enforced. It must exist when a claim is submitted. Insurable interest must exist only at the time the applicant enters into a life insurance contract. It must continue for the life of the policy.

Insurable interest must exist only at the time the applicant enters into a life insurance contract.

When first meeting prospective insurance applicants, a producer must give them a document that explains the general features, benefits, and conditions of the type of insurance being considered, which is called a prospectus buyer's guide key points document policy summary

buyer's guide

Which of the following is NOT an unfair claims settlement practice if committed by an insurance company in Washington? failing to promptly settle a claim for which liability is uncertain failing to promptly acknowledge communications about claims offering to settle claims for less than due to encourage litigation misrepresenting facts or insurance policy provisions;

failing to promptly settle a claim for which liability is uncertain

In addition to the fiduciary responsibility they have with all customer premiums and assets, producers are expected to do all the following EXCEPT: disclose all pertinent information concerning a proposed policy avoid all forms of rebating make sure all product recommendations are suitable for the customer seek opportunities to replace existing policies with newer products

seek opportunities to replace existing policies with newer products

In cases where an existing life insurance policy is going to be replaced by new life insurance policy, the producer must do all the following EXCEPT: sign a form assuming full responsibility for any consequences that may result from the replacement give the applicant a policy comparison statement signed by the producer give the applicant a "Notice to Applicants Regarding Replacement of Life Insurance" list all existing life insurance policies that will be replaced

sign a form assuming full responsibility for any consequences that may result from the replacement

With respect to the field of insurance, who are the two parties bound by the law of agency? the insurer and the insured the state insurance department and the insurer the insurance company and the producer the producer and the policyowner

the insurance company and the producer

Tom is a 45-year-old senior accountant employed by ABC, Inc. Under ABC's employer-pay-all group life plan, Tom's coverage is $120,000. What amount of that coverage is taxable to Tom? $70,000 $0 $120,000 $50,000

$70,000

With a traditional whole life insurance policy, policy loans can be as high as: 50-75 percent of the cash value, less any outstanding debt against the policy 100 percent of the cash value, less any outstanding debt against the policy 25 percent of the cash value, less any outstanding debt against the policy 75-90 percent of the cash value, less any outstanding debt against the policy

100 percent of the cash value, less any outstanding debt against the policy

What is the maximum time for which the Commissioner can order the suspension of a producer's license? 12 months 24 months 6 months 18 months

12 months

Frank's first income payment under a variable annuity is $1,950. The value of each accumulation unit in each of the sub-accounts in Frank's contract is $10 at the time of annuitization. How many annuity units does Frank have? 1950 19 225 195

195

Endowment contracts issued today no longer qualify as life insurance (for tax purposes), but those issued before what date were grandfathered and still retain favorable life insurance taxation? 1996 1976 1986 2006

1986

Under the standard bring-back rule, assets transferred out of a decedent's estate will be valued in the estate if the transfer occurred within how many years before death? 5 years 3 years 7 years 4 years

3 years

What is a typical life insurance policy's grace period? 20 days 10 days 31 days 2 years

31 days

All the following are standard life insurance policy exclusions EXCEPT: war clause hazardous hobby exclusion suicide provision 6-month legal action limit provision

6-month legal action limit provision

Ann is the beneficiary of an annuity owned by Jim (who is also the annuitant). Jim intended to annuitize the contract at retirement but died shortly before retiring. What benefits will Ann receive from the annuity? Ann's right to any funds will be based on the income payout option that Jim selected. Ann will receive the annuity's accumulated value and may select a payout option. Ann will receive the contract's funds in a lump sum. Ann will receive income for life.

Ann will receive the annuity's accumulated value and may select a payout option.

Which of the following statements regarding variable annuity annuitization is correct? Annuitization under a variable annuity contract provides income payments that can increase but not decrease. Annuitization under a variable annuity contract provides income payments that can fluctuate up or down. Annuitization under a variable annuity contract provides income payments that remain fixed. Annuitization under a variable annuity contract provides income payments that are guaranteed to increase at a specified rate.

Annuitization under a variable annuity contract provides income payments that can fluctuate up or down.

All the following statements regarding life insurance cost-of-living (COL) riders are correct EXCEPT: The cost-of-living rider on a whole life policy is typically an increasing term insurance rider. As the consumer price index (CPI) increases, so does the policyowner's coverage, providing the insured can prove insurability. Universal life policies, with their highly flexible terms, are not good candidates for the addition of a cost-of-living rider. Adjustable life policies often include a cost-of-living provision that increases the face amount with a corresponding increase in premium.

As the consumer price index (CPI) increases, so does the policyowner's coverage, providing the insured can prove insurability.

Bill recently purchased an indeterminate premium whole life insurance policy. Which one of the following statements about his policy is correct? Bill's policy was issued with a low introductory premium that may periodically increase over time, but which will never be higher than a guaranteed maximum rate. Bill will pay a low initial fixed premium for several years, at which point there will be a one-time increase in the premium that is guaranteed to remain level thereafter. Bill's policy was issued with a high introductory premium that will be reduced as the insurer's actual experience is known. Bill's policy was issued with a premium that will be level for most of the policy period but may be reduced under certain conditions.

Bill's policy was issued with a low introductory premium that may periodically increase over time, but which will never be higher than a guaranteed maximum rate.

All of the following statements about binding receipts are correct EXCEPT: An alternative to a binding receipt is the temporary insurance agreement. Binding receipts are the most common type of premium receipt used with life insurance sales. A binding receipt guarantees coverage from the time the applicant completes the application through the underwriting process, even if the applicant is found to be uninsurable. If underwriters determine the applicant is uninsurable, then a binding receipt terminates coverage when that determination is made.

Binding receipts are the most common type of premium receipt used with life insurance sales.

Which statement is correct with respect to the contract charges and fees charged by variable life and traditional whole life policies? Both charge a fee for expenses incurred by the separate investment accounts. Both base the premium on a mortality charge that reflects the insured's risk of death. Both charge account transfer fees. Both charge investment advisory fees.

Both base the premium on a mortality charge that reflects the insured's risk of death.

Anne, a life insurance applicant, wants to change an answer that she gave on the application. She should do which of the following? Cross out and initial the incorrect entry, and enter the correct information next to it. Erase the original entry and enter the correct information. Cover up the incorrect entry and write the correct information over it. Attach a note to the application explaining what she intended to answer.

Cross out and initial the incorrect entry, and enter the correct information next to it.

Which of the following actions is taken if the amount of OASDI benefits that a family receives, based on the earnings of a single worker, exceeds the maximum family retirement benefit? The benefit paid to the worker is reduced. Future benefits payable to the family members will be reduced proportionately. The family will be required to return the excess benefits. Benefits paid to some family members will be terminated.

Future benefits payable to the family members will be reduced proportionately.

All of the following statements regarding a variable annuity's assumed interest rate (AIR) are correct, EXCEPT: The value of each annuity payment is directly affected by changes in the AIR. If the actual return is greater than the AIR, payments will decrease. Annuitized payments under a variable annuity are based on the AIR and the value of the contract's annuity units. If the value of the annuity units grows at the same rate as the AIR, payments to the annuitant will stay the same.

If the actual return is greater than the AIR, payments will decrease.

All of the following statements regarding the money laundering process and anti-money laundering efforts are correct EXCEPT: Money laundering is the process of integrating illegally obtained money into the legal monetary system in a way that hides its illegal origins. Insurance companies are exempt from the need to create and maintain anti-money laundering programs. Permanent life insurance can be used to launder money. There are three basic levels of the money laundering process: placement, layering, and integration.

Insurance companies are exempt from the need to create and maintain anti-money laundering programs.

Howard, 33, and Mary, 32, want to fund their 13-year-old daughter's college education. Which of the following is the most appropriate advice about using a deferred annuity for this purpose? Though there may be some merits to the idea, the use of deferred annuity withdrawals to pay for personal expenses like college tuition is forbidden under federal law. It is a good idea. Deferred annuities can be used for almost any purpose that calls for future income. Though not the best use for an annuity, it is acceptable because the contract's value accumulates on a tax-deferred basis. It is not recommended. Deferred annuities typically impose surrender charges on funds withdrawn during a contract's early years, and withdrawals from annuities before the owners reach age 59½ may be subject to a tax penalty.

It is not recommended. Deferred annuities typically impose surrender charges on funds withdrawn during a contract's early years, and withdrawals from annuities before the owners reach age 59½ may be subject to a tax penalty.

When must insurable interest exist for a life insurance policy to be valid? It is only necessary for insurable interest to exist at the time the applicant applies for a life insurance contract. Insurable interest must always exist for a life insurance policy to be valid. Insurable interest must exist only at the time of the insured's death for a life insurance policy to be valid. Insurable interest is never required for a life insurance policy to be valid.

It is only necessary for insurable interest to exist at the time the applicant applies for a life insurance contract.

When a person retires before full retirement age, what happens to the monthly income amount of his or her Social Security retirement benefits? It is permanently increased. It is delayed until the person reaches full retirement age. It is permanently reduced. It is forfeited.

It is permanently reduced.

Which of the following correctly describes the disability income benefit rider available with life insurance policies? A disability income benefit rider distributes the policy's death benefit in the form of monthly payments if the insured becomes disabled. It pays a monthly income determined by a formula specified in the policy if the insured becomes disabled, without impacting the policy's cash value or face amount. A disability income benefit rider pays a monthly income equal to the policy premium if the insured becomes disabled. A disability income benefit rider distributes the policy's cash value in the form of monthly payments if the insured becomes disabled.

It pays a monthly income determined by a formula specified in the policy if the insured becomes disabled, without impacting the policy's cash value or face amount.

The charge-free withdrawals provision of a deferred annuity contract does which of the following? It permits annuity contract owners to withdraw a specified percentage of the accumulated value annually without imposing a surrender charge. It exempts deferred annuity withdrawals from surrender charges and penalty taxes as long as the withdrawal does not exceed a specified percentage of the accumulated value. It exempts deferred annuity withdrawals from surrender charges and all taxes as long as the withdrawal does not exceed a specified percentage of the accumulated value. It permits annuity contract owners to withdraw a specified percentage of the accumulated value on a one-time basis without imposing a surrender charge.

It permits annuity contract owners to withdraw a specified percentage of the accumulated value annually without imposing a surrender charge.

The Genetic Information Nondiscrimination Act (GINA) essentially does which of the following? It prohibits insurance companies from telling applicants that they were rejected on the basis of information derived through a genetic test (if that is the case). It prohibits insurance companies from discriminating on the basis of information derived through a genetic test. It requires insurance companies to tell applicants that they were rejected on the basis of information derived through a genetic test (if that is the case). It requires insurance companies to consider genetic test information when underwriting applicants for life insurance.

It prohibits insurance companies from discriminating on the basis of information derived through a genetic test.

How does the end of the contestability period affect coverage for death arising from an excluded risk? The premium will increase to cover the risk. The insurer can no longer exclude the risk. The policy will cover the death. It will not affect coverage.

It will not affect coverage.

Melissa asks to continue her lapsed universal life insurance policy under the extended term option. How will the insurance company respond? It will ask Melissa to complete the nonforfeiture option selection form. It will tell Melissa that her policy does not have the extended term option and she may only take any remaining cash value in cash or let the policy continue without premiums until the cash value can no longer cover monthly deductions. It will tell Melissa that she cannot elect the extended term option but may elect either the reduced paid-up or cash value payment options. It will tell Melissa that lapsed universal life policies automatically go on the extended term option.

It will tell Melissa that her policy does not have the extended term option and she may only take any remaining cash value in cash or let the policy continue without premiums until the cash value can no longer cover monthly deductions.

All the following uses for life insurance in a business represent a valid insurable interest, EXCEPT: Life insurance used to provide funds in the event an insured key employee or partner dies. Life insurance purchased on an important customer to make up for the financial losses that might occur when that customer dies. Life insurance purchased by business partners to provide funds that can be used to buy out the business interest of the one who dies. Life insurance bought by businesses to cover the lives of their key employees or owners.

Life insurance purchased on an important customer to make up for the financial losses that might occur when that customer dies.

Which of the following statements regarding the way whole life insurance differs from term life insurance is most correct? Only whole life insurance offers level premium payments. Only whole life insurance builds a cash value. Only whole life insurance offers protection until age 80. Only whole life insurance can be renewed.

Only whole life insurance builds a cash value.

All of the following statements regarding the career agency distribution system are correct EXCEPT: There are two types, the general agency system and the managerial system. It uses agents who primarily if not exclusively represent one insurer. The managerial form of career agency system uses company employees as the agency managers. Personal producing general agents (PPGAs) are commonly hired to manage career agencies.

Personal producing general agents (PPGAs) are commonly hired to manage career agencies.

All other factors being equal, which of the following applicants can expect to pay the lowest premium for a given face amount of life insurance protection? Pete, a preferred risk Shaun, whose application was declined as uninsurable Jim, a standard risk Carl, a substandard risk

Pete, a preferred risk

All the following statements regarding traditional whole life insurance policy loans are correct EXCEPT: Policy loans are available from the moment the policy is issued. The maximum loan amount may be as high as 100 percent of the cash value, less any prior debt against the policy. Policy loans do not have to be repaid by the policyowner. Most states limit the maximum loan interest rate to no more than 8 percent.

Policy loans are available from the moment the policy is issued.

All the following statements regarding adjustable life insurance are correct EXCEPT: Policy premiums can be changed up or down whenever the policyowner wants to do so. Changing the premium will change the policy's future cash value growth. Adjustable life is a good choice for someone who wants the ability to change the policy value as insurance needs change. The policy death benefit may be increased by increasing the premium.

Policy premiums can be changed up or down whenever the policyowner wants to do so.

Which of the following explains why a traditional waiver of premium rider does not work with a universal life insurance policy? Universal life insurance policies have more administrative expenses than traditional life insurance policies. Premium payments can be occasionally missed with a universal life insurance policy, whereas they cannot be skipped with a traditional life insurance policy. Expense and mortality charges for a universal life policy are unbundled from the premium, whereas for traditional life insurance policies they are bundled into the premium. Premium amounts for a universal life policy are flexible, whereas they are fixed for traditional life insurance policies.

Premium amounts for a universal life policy are flexible, whereas they are fixed for traditional life insurance policies.

Which of the following best describes how the insured's money is handled in a variable life insurance policy? Premiums are invested in certificates of deposit issued by the insurance company. Premiums are placed in the insurance company's general account. Premiums are placed in investment subaccounts selected by the insurance company. Premiums are placed in investment subaccounts selected by the policyowner.

Premiums are placed in investment subaccounts selected by the policyowner.

Under the payor benefit rider of a juvenile life insurance policy, which of the following happens if the payor becomes disabled before the maximum age specified in the rider? The juvenile policy becomes paid-up. Premiums are waived until the payor recovers. Premiums are waived until the payor recovers or the insured child reaches a certain age (e.g., 21 or 25), whichever occurs first. Premiums are waived until the insured child reaches a certain age.

Premiums are waived until the payor recovers or the insured child reaches a certain age (e.g., 21 or 25), whichever occurs first.

Which statement regarding adjustable life insurance is correct? It offers five times higher cash value than whole life insurance. Premiums can increase or decrease to suit the policyowner's changing needs. The policyowner can increase the death benefit and keep the premium unchanged without hurting the policy's cash value. The policyowner can stop and start premium payments at any time.

Premiums can increase or decrease to suit the policyowner's changing needs.

With respect to adjustable life insurance, which of the following statements is correct? The policyowner can increase the death benefit and keep the premium unchanged without hurting the policy's cash value. It offers five times higher cash value than whole life insurance. Premiums are flexible and can even be stopped periodically. Premiums can increase or decrease to suit the policyowner's changing needs.

Premiums can increase or decrease to suit the policyowner's changing needs.

Sarah, age 40, has just bought a 20-pay whole life policy. Which of the following statements is correct when she turns 60? Premiums will no longer be required, but her coverage will remain in effect for her entire life. She will receive the policy's cash value. She will receive the policy's death benefit. She will have a fully matured policy.

Premiums will no longer be required, but her coverage will remain in effect for her entire life.

All of the following statements about the taxation of annuities are correct EXCEPT: If an annuity owner withdraws funds as full or partial surrenders before the contract annuitizes, then any withdrawn annuity interest earnings are taxable. Qualified annuities are taxed no differently than nonqualified annuities. An annuity's basis-essentially the sum or premiums paid-is not subject to taxation however it is withdrawn. Interest that accumulates in a deferred annuity is not taxed while the funds remain in the annuity.

Qualified annuities are taxed no differently than nonqualified annuities.

Ralph, Jerry, and Paula are primary and equal beneficiaries of the $600,000 insurance policy on the life of their mother, Judy. Ralph dies before his mother. He leaves two children, Tim and Hal. If Judy's life insurance policy designates the death benefit be paid "per stirpes," how will the insurer distribute the policy benefits? Judy's estate will get the entire $600,000 death benefit. Ralph's $200,000 share will pass equally to his two children when Judy dies. The surviving siblings, Jerry and Paula, will each receive $200,000. Tim and Hal will each receive $200,000. The surviving siblings, Jerry and Paula, will each receive $100,000. Tim and Hal will each receive $100,000. The surviving siblings, Jerry and Paula, will each receive $100,000.

Ralph's $200,000 share will pass equally to his two children when Judy dies. The surviving siblings, Jerry and Paula, will each receive $200,000.

John, age 66, has started receiving Social Security retirement benefits. He has one child, Sara, age 15, who is permanently disabled. Which statement correctly describes any Social Security benefits she may be eligible to receive? Sara will be eligible to receive a monthly Social Security child's benefit until she reaches age 22. Sara will be eligible to receive a monthly Social Security child's benefit indefinitely. Sara would not be eligible for the Social Security child's benefit until she turns age 21. Sara will be eligible to receive a monthly Social Security child's benefit until she reaches age 16.

Sara will be eligible to receive a monthly Social Security child's benefit indefinitely.

All the following statements regarding perils and hazards are correct EXCEPT: Smoking cigarettes is an example of a peril. Indifference to loss is an example of a hazard. A peril is the immediate cause of a loss and is the event that insurance protects against. A hazard is a condition that raises the chance of a peril occurring.

Smoking cigarettes is an example of a peril.

Life insurance has been purchased by ABC Company on the lives of two partners, Hugh and Danny, and three key employees Eileen, Vern, and June. Which of the following would apply if Hugh and June were to leave the business? The company could keep the life insurance it has on both Hugh and June, even though both are no longer employed there. The company could keep the life insurance it has on Hugh, since he is a principal of the company, but would have to drop June's coverage, because she is not. The company would have to drop its coverage for both Hugh and June within 30 days of their departures. The company can only retain its coverage on June because she is not a principal of the company.

The company could keep the life insurance it has on both Hugh and June, even though both are no longer employed there.

All the following statements about ordinary (straight) whole life insurance are correct EXCEPT: It has a steadily increasing cash value. The death benefit increases during the early policy years and then levels off. Premiums remain level. The insured pays premiums for his or her entire life.

The death benefit increases during the early policy years and then levels off.

In which of the following situations would a withdrawal from a deferred annuity before age 59½ be subject to a 10 percent penalty tax? The distribution is paid so that the contract owner can retire a mortgage. The distribution is paid because the contract owner has become disabled. The distribution is paid as a death benefit upon the contract owner's death. The distribution is spread out over the owner's life in substantially equal periodic payments.

The distribution is paid so that the contract owner can retire a mortgage.

Henry owns a variable universal life insurance policy. He has put half of his premiums in the fixed account, 25 percent in a growth stock fund subaccount, and 25 percent in a bond fund subaccount. With respect to this policy, all the following statements are correct, EXCEPT: Henry can transfer funds among variable subaccounts with no income tax consequences. Only the funds in the fixed account are guaranteed as to principal and interest. The insurance company bears the investment risk for the amounts invested in the variable subaccounts. The premiums in the fixed account earn interest at the insurer's current rate.

The insurance company bears the investment risk for the amounts invested in the variable subaccounts.

With respect to third-party ownership of life insurance in the personal insurance market, all the following statements are true EXCEPT: Third-party ownership is common in estate planning. Policy ownership can be transferred to anyone without there having to be an insurable interest between that person and the insured. Third-party ownership is the basis of stranger-oriented life insurance (STOLI). The insured has the right to name the beneficiary.

The insured has the right to name the beneficiary.

Jerry names a trust as the beneficiary of his life insurance. When Jerry dies, how will this trust work? The trust passes the insurance benefit to Jerry's next of kin. A trust cannot be a beneficiary; Jerry must name an individual or business. The insurer pays the death benefit to the trustee who manages the assets for the trust's beneficiaries, named by Jerry when the trust was formed. The trustee invests the insurance benefit in securities.

The insurer pays the death benefit to the trustee who manages the assets for the trust's beneficiaries, named by Jerry when the trust was formed.

If an insured dies during her life insurance policy's grace period without having paid her premium, what is the insurance company's obligation? The insurer will pay the death benefit after first deducting the unpaid premium and any unpaid policy loans. The insurer will pay only the policy's cash surrender value. The insurer will cancel the policy and pay nothing. The insurer will pay the full death benefit.

The insurer will pay the death benefit after first deducting the unpaid premium and any unpaid policy loans.

If an applicant for life insurance unintentionally misstates her age on her life insurance application, what will the insurer do if this is discovered after the end of the contestability period? The insurer will adjust the issue date to compensate for the loss of interest and expenses. The insurer will re-calculate the death benefit. The insurer will void the policy. Nothing, because the contestability period has ended.

The insurer will re-calculate the death benefit.

All the following statements regarding life insurance level premiums are correct EXCEPT: For most types of permanent life insurance policy, premiums remain level regardless of the mode of premium selected. The owner of a whole life policy may elect to let the insurer raise premiums over time, resulting in a lower initial premium than would be the case with a level premium policy. The policyowner pays the same premium amount each time it is due for as long as the policy is in force. The premium amount does not change even though the risk to the insurer increases over time.

The owner of a whole life policy may elect to let the insurer raise premiums over time, resulting in a lower initial premium than would be the case with a level premium policy.

All of the following statements regarding the reduced paid-up life insurance nonforfeiture option are correct EXCEPT: The paid-up policy will not build any more cash value. If the lapsed policy was a participating policy, the paid-up policy remains eligible for dividends. A policyowner of a lapsed policy can take the reduced paid-up option regardless of whether the lapsed policy was issued on a standard or substandard (rated) basis. A paid-up policy under the reduced paid-up insurance option requires no further premiums nor can any be paid.

The paid-up policy will not build any more cash value.

What happens when a universal life insurance policy's cash value no longer covers the monthly deductions to cover the policy's insurance and operational costs? The policy lapses. The policy goes on the extended term option. The policy goes on the reduced paid-up option. The policy is surrendered for cash.

The policy lapses.

Which one of the following statements about term life insurance is correct? It is permanent insurance. A cash value accumulates in term life policies. The policy pays a death benefit only if the insured dies during the term. It is intended to cover the insured to age 120.

The policy pays a death benefit only if the insured dies during the term.

If a universal life insurance policyowner skips a couple monthly premium payments, what is most likely to occur assuming the policyowner wishes to keep the policy in force? The death benefit will be decreased. The skipped premiums are treated as a policy loan. The policy will lapse at the end of the premium grace period. The policy will remain in force as long as the cash value covers the monthly deductions and charges.

The policy will remain in force as long as the cash value covers the monthly deductions and charges.

All the following statements about the accumulate at interest dividend option are correct EXCEPT: The insurer credits a rate of interest to the dividends as they remain on deposit with the insurer. Participating policy dividends are not generally taxable. The dividends are retained in the insurer's general account. The policyowner can only withdraw the accumulated dividends and interest on the policy's anniversary date.

The policyowner can only withdraw the accumulated dividends and interest on the policy's anniversary date.

If a life insurance policy's death benefit is paid to the insured's estate, which of the following statements is correct? The proceeds will never be subject to federal income tax. The proceeds cannot be used to make charitable gifts. The proceeds can be used to pay for estate taxes or other costs that an estate may face. The proceeds cannot be given to heirs named in a will.

The proceeds can be used to pay for estate taxes or other costs that an estate may face.

Which of the following statements best explains the basic level premium concept of ordinary whole life insurance? Funds are withdrawn from the policy's cash value in the later years to pay the rising cost of pure insurance. The death benefit is decreased to offset the rising cost of insurance with age. The steady reduction of the policy's net amount at risk offsets the cost of pure insurance that rises with age. The insurer averages the cost of pure insurance over the insured's life expectancy so that the mortality charge remains level.

The steady reduction of the policy's net amount at risk offsets the cost of pure insurance that rises with age.

Which statement about deferred annuity surrender charges is correct? The surrender charge is usually applied to all withdrawals prior to annuitization. The surrender charge usually remains level. The insurer may extend the surrender charge period if the annuity owner makes excessive numbers of withdrawals. The surrender charge percentage typically decreases over the surrender charge period.

The surrender charge percentage typically decreases over the surrender charge period.

All the following statements about standard policy exclusions are correct EXCEPT: Standard exclusions found in most policies last for the life of the policy, even after the contestability period ends. The war exclusion usually excludes paying the death benefit only if the death directly resulted from war. The war and commission of a felony exclusions are required by law. If a policy excludes a risk from coverage, the insurer will not pay the policy's benefit if death results from that risk.

The war and commission of a felony exclusions are required by law.

Which of the following most accurately describes the standard life insurance policy war clause? The war exclusion excludes paying the death benefit if the insured dies while in the military, but only if there is a declared war in effect. The war exclusion excludes paying the death benefit only if the death is the direct result of war action. The war exclusion excludes paying the death benefit if the insured dies while in the military, whether or not there is a declared war in effect. The war exclusion excludes paying the death benefit if the insured dies when there is a declared war in effect.

The war exclusion excludes paying the death benefit only if the death is the direct result of war action.

Which one of the following statements about indexed whole life insurance is correct? The policyowner may adjust the policy premium up or down. There are two different premium plans available to indexed whole life policyowners, with one plan starting out with a lower premium than the other. It combines whole life insurance and term life insurance. Its cash values may decrease as well as increase.

There are two different premium plans available to indexed whole life policyowners, with one plan starting out with a lower premium than the other.

Which of the following statements regarding association group life is correct? There must be a minimum of ten association members enrolled in the plan. The insured members are the policyowners. The association and its members must share premiums. The association must pay all of the premiums.

There must be a minimum of ten association members enrolled in the plan.

All of the following are characteristics of a stock insurance company EXCEPT: They have minimum financial capital requirements that must be met before they can conduct business. They may issue dividends. They are owned by policyowners. They are governed by a board of directors.

They are owned by policyowners.

Any after-tax contributions Tom makes toward the cost of his group life insurance coverage are treated in which of the following ways? They are subtracted from his taxable income. They are subtracted from the imputed income of the employer's contributions on a dollar-for-dollar basis. They are added to his taxable income. They are added to the imputed income of the employer's contributions on a dollar-for-dollar basis.

They are subtracted from the imputed income of the employer's contributions on a dollar-for-dollar basis.

Endowment contracts are NOT considered life insurance (for tax purposes) because: They do not pay a death benefit if the insured dies before the contract matures. They never mature. They do not build cash values. They endow before age 120.

They endow before age 120.

What happens to Social Security retirement benefits when a person postpones them past their full retirement age (FRA)? They remain the same. They are permanently reduced. They are forfeited. They increase.

They increase.

Why do endowment contracts not enjoy the same favorable tax treatment as life insurance? Their cash values equal the contract's death benefit when the policy is issued. They do not build cash values. They do not pay benefits if the insured dies before the contract matures. They mature before age 120.

They mature before age 120.

Why do most insurers require a waiting period of four to six months before the disability income benefit rider begins payments? They want to control claims by eliminating claims for short-term disabilities. They want to get at least six months of insurance premiums before they pay for the disability. They must meet federal disability waiting period requirements. They want to eliminate disability income rider claims by letting disabled insureds die before qualifying for benefit payments.

They want to control claims by eliminating claims for short-term disabilities.

Tiger Motors Company has 25 employees and would like to start a group life insurance plan. However, one of its employees has had two heart attacks during the past five years and his health is questionable. What will happen in this case? Tiger Motors can charge the employee a higher premium than the other employees. Tiger Motors can exclude the employee from coverage. Tiger Motors can ask the employee to voluntarily withdraw from the plan to make premiums lower. Tiger Motors cannot exclude the employee from the plan based on his risk potential.

Tiger Motors cannot exclude the employee from the plan based on his risk potential.

Which of the following statements generally guides insurance companies in determining "loading"? The resulting net premiums should help the company maintain or improve its competitive position. Expenses should be divided primarily among the company's most profitable plans and lowest mortality experience. Total loading from all policies should meet industry averages. Total loading from all policies should cover total operating costs, provide a safety margin, and contribute to profits or surplus.

Total loading from all policies should cover total operating costs, provide a safety margin, and contribute to profits or surplus.

Which of the following most correctly describes the difference between decreasing term insurance and level term insurance? Under decreasing term insurance, the death benefit decreases over the policy period while a level term policy maintains a level death benefit over the policy period. Premiums decrease over the life of a decreasing term policy but stay the same for level term policies. Decreasing term life insurance can be converted to a permanent policy while level term cannot. The insured can renew decreasing term life insurance but not level term.

Under decreasing term insurance, the death benefit decreases over the policy period while a level term policy maintains a level death benefit over the policy period.

All of the following statements about key person life insurance are correct, EXCEPT: The business applies for, owns, and is the beneficiary of the policy covering the life of a key employee. Key person, or key employee, life insurance is an example of third-party ownership. Upon the insured employee's death, the employee's surviving family receives the policy's death benefit. Life insurance used as key person life is normally owned by the business rather than the insured.

Upon the insured employee's death, the employee's surviving family receives the policy's death benefit.

Which statement about variable annuities (VAs) is correct? With a variable annuity, annuity income payments may increase or decrease based on the investment performance of the sub-accounts supporting them. Variable annuities can only be purchased as deferred contracts. While VAs may yield higher returns than a fixed annuity, both types guarantee the annuity's principal. Variable annuities offer fewer income settlement options than fixed annuities.

With a variable annuity, annuity income payments may increase or decrease based on the investment performance of the sub-accounts supporting them.

If Sam makes a full or partial withdrawal from his deferred annuity before the contract annuitizes, which of the following statements applies? Withdrawals are fully tax free. Withdrawals are fully taxable until they equal the contract's gain (i.e., interest earnings), after which all subsequent withdrawals are tax free. Withdrawals are tax free up to Sam's investment in the contract (i.e., his basis), after which all subsequent withdrawals are fully taxable as a distribution of gain. The taxable portion of the withdrawal is determined after calculating the exclusion ratio.

Withdrawals are fully taxable until they equal the contract's gain (i.e., interest earnings), after which all subsequent withdrawals are tax free.

All of the following statements about fixed whole life insurance cash values are correct EXCEPT: As long as premiums are paid, the insurance stays in force, the cash values grow, and the policy is guaranteed to pay its specified death benefit. Cash values grow over the life of the policy and are calculated to equal the policy's face amount at the insured's age 120 (age 95 in the case of universal life insurance). Withdrawing or borrowing from the cash value will have no impact of the policy's death benefit. The policyowner owns the cash value in the policy and can access it.

Withdrawing or borrowing from the cash value will have no impact of the policy's death benefit.

To meet the federal definition of life insurance and thus qualify for life insurance's favorable tax treatment, all permanent life insurance policies must have: a corridor of pure insurance protection between the cash value and death benefit, the amount of which depends on the insured's age a cash value that never equals the death benefit a cash value that grows to equal the death benefit no later than the insured's life expectancy a cash value that eventually exceeds the policy's death benefit

a corridor of pure insurance protection between the cash value and death benefit, the amount of which depends on the insured's age

Mary, a currently insured worker under Social Security, recently died. Her 85-year-old widowed mother, who was financially dependent on Mary, would be entitled to which of the following benefits under Social Security? a lump-sum benefit of $255 only a monthly benefit of 82.5 percent of Mary's PIA no benefit, as survivor benefits are available to spouses and children only a monthly benefit equal to Mary's PIA

a monthly benefit of 82.5 percent of Mary's PIA

The death of a fully insured worker may result in all the following Social Security benefits being payable EXCEPT: a monthly income benefit to the deceased worker's brothers or sisters, if any a monthly benefit to the surviving spouse, if any a lump-sum death benefit if there is at least one surviving spouse or dependent child a monthly benefit to surviving parents, if any

a monthly income benefit to the deceased worker's brothers or sisters, if any

Michelle sells variable life insurance and annuity products in Washington. To do so, what must she have? a producer's license and a securities license an adjuster's license a producer's license a securities license

a producer's license and a securities license

Jones is the policyowner and insured of a life insurance policy that contains a standard suicide provision. He commits suicide 18 months after the policy was issued, Jones's beneficiary will get which of the following from the insurer? nothing a return of premiums paid, plus interest a return of the premiums paid only the full death benefit

a return of premiums paid, plus interest

Under a family term rider to a life insurance policy, children who are covered under the rider can typically convert their coverage to permanent coverage as early as: age 25, as long as evidence of insurability is provided age 25, without having to provide evidence of insurability age 21, without having to provide evidence of insurability age 21, as long as evidence of insurability is provided

age 21, without having to provide evidence of insurability

The entire contract provision states that changes can be made to policy provisions by: the producer only an executive officer of the company only the policyowner, an insurance company executive, or the producer the policyowner only

an executive officer of the company only

When can a waiver of premium rider be added to a life insurance policy? up to one year after the policy is issued, regardless of age any time after the policy is issued, subject to a maximum age stipulated in the policy only when the policy is issued up to six months after the policy has been issued, regardless of age

any time after the policy is issued, subject to a maximum age stipulated in the policy

If a permanent life insurance policy lapses and the owner does NOT select a nonforfeiture option, the insurer will automatically: surrender the policy and pay out the cash value apply the extended term insurance option suspend coverage until the policyowner either reinstates or surrenders the policy apply the reduced paid-up option

apply the extended term insurance option

Which one of the following is the most appropriate use of life insurance? buying life insurance on an unrelated person as an investment buying life insurance to obtain workers' compensation protection buying life insurance to save for a big vacation in several years buying life insurance to insure all the parties to a business buy-sell agreement

buying life insurance to insure all the parties to a business buy-sell agreement

The main purpose for errors and omissions insurance (E&O) is to: provide legal protection to the producer who is charged with willfully engaging in an unfair trade practice pay for an insurance company executive to meet with a policyowner to correct an error made by the producer during the sales process allow the producer to be less diligent in complying with insurance sales disclosure requirements cover damages that arise due to services a producer non-willfully failed to render

cover damages that arise due to services a producer non-willfully failed to render

Which one of the following would a state NOT permit as a life insurance policy exclusion? death directly resulting from war death resulting from a plane crash in which the insured was a fare-paying passenger death resulting from the insured's hobby death resulting from suicide in the first couple policy years

death resulting from a plane crash in which the insured was a fare-paying passenger

Which type of life insurance policy would most likely be used to insure the declining balance of a home mortgage? renewable term increasing term level term decreasing term

decreasing term

An insurance company is developing a new product. Which of the following is the actuaries' most important responsibility? determining the actual premium to be charged to an applicant for the new product determining the basic premium rates for the new product designing the product's features and benefits assuring that the new product will appeal to average consumers

determining the basic premium rates for the new product

Jenny is considered fully insured under Social Security, which qualifies her for which of the following benefits? disability benefits and retirement benefits only survivor benefits only disability benefits, survivor benefits, and retirement benefits survivor benefits and retirement benefits only

disability benefits, survivor benefits, and retirement benefits

Which of the following is NOT a prohibited marketing practice? discrimination among risks twisting rebating premiums false advertising

discrimination among risks

If the Alpha-Omega Corporation wants to provide cost-effective life insurance for all its full-time employees, it will most likely buy which of the following? business life insurance group term life insurance individual term life insurance whole life insurance

group term life insurance

Jack, a producer, ignores the Insurance Commissioner's cease and desist order and continues engaging in a prohibited practice. He can be subject to all of the following disciplinary measures EXCEPT: license suspension license revocation fine imprisonment

imprisonment

Which one of the following best describes a policy that has a relatively low face amount and has premiums that are paid to an insurance agent who generally calls on the policyowner at home to collect them? ordinary term insurance ordinary whole life insurance industrial life insurance group life insurance

industrial life insurance

By submitting an application for life insurance without the first premium, Larry is doing which of the following? inviting the insurer to make an offer negotiating for lower premiums suggesting that the insurer should not issue the policy for some reason making the policy's effective date earlier than it would be if the initial premium was paid with the application.

inviting the insurer to make an offer

What is the main appeal of joint life insurance? higher death benefit underwriting is performed only on the older of the two applicants lower cost than two separate policies ability to cover an entire family

lower cost than two separate policies

An applicant for a $500,000 whole life insurance policy pays the initial premium along with his application. In this case, what has the applicant done? made an offer to the insurer accepted a counteroffer from the insurer made a counteroffer to the insurer accepted an offer from the insurer

made an offer to the insurer

Annuity income payments are most commonly paid on what schedule? in a lump sum annually monthly quarterly

monthly

When does a fixed deferred annuity contract provide a death benefit? never; only life insurance policies have death benefits only if the annuitant dies after the contract is annuitized only if the contract owner or annuitant dies during the accumulation period only if the owner purchased a death benefit rider with the annuity

only if the contract owner or annuitant dies during the accumulation period

The Insurance Commissioner can take all of the following actions against a party believed to have violated the insurance code EXCEPT: issue an order to cease and desist hold an administrative hearing order the arrest of the party sue for an injunction

order the arrest of the party

Under the re-entry method, an insured can renew a level term life insurance policy at the end of the specified term at a lower rate than the guaranteed rate by doing which of the following? proving that he or she is under age 50 proving insurability agreeing to convert to a permanent life insurance policy paying a premium surcharge

paying a premium surcharge

If the parties disagree over the terms of an insurance contract, courts will typically interpret anything unclear in the contract in favor of which party? agent insurance company policyowner beneficiary

policyowner

manda, age 45, bought a $50,000 ten-year renewable and convertible term life policy. Regarding this, all the following statements are correct EXCEPT premiums for this policy will be more than for a $50,000 ten-year nonrenewable and nonconvertible term life policy. premiums for this policy will be more than for a $50,000 ten-year nonrenewable but convertible term life policy. premiums for this policy will be more than for a $50,000 ten-year renewable but non-convertible term life policy. premiums for this policy will be more than for a $50,000 permanent life insurance policy.

premiums for this policy will be more than for a $50,000 permanent life insurance policy.

The purpose for the Policy Summary, which must be given to every insurance applicant before an application is signed, is to: provide buyers with details of the specific insurance contract they are considering for purchase disclose all the hidden costs associated with the policy being applied for explain the general features, benefits, and conditions of the type of insurance being considered explain the step-by-step process involved in purchasing the recommended product

provide buyers with details of the specific insurance contract they are considering for purchase

In-person delivery of a whole life insurance policy gives the producer the opportunity to do all of the following, EXCEPT: get any required delivery forms, discuss any exclusions, and explain any substandard ratings explain that the free-look period begins at that moment, giving the policyowner ten days (in most states) to return the policy for a full premium refund explain policy benefits, terms, and riders review coverage to determine if the policyowner wants to increase the policy's face amount

review coverage to determine if the policyowner wants to increase the policy's face amount

Grace's annuity pays her an income for her lifetime, regardless of how long she lives. When she dies, no further payments are made to anyone. Which type of settlement options does she have? life income with period certain life income with guaranteed minimum (refund guarantee or life annuity certain) straight, or pure, life income joint and survivor life income

straight, or pure, life income

In a collateral assignment, policyowners may do all the following, EXCEPT: pay the premiums surrender the policy borrow additional money against the cash value as long as enough remains to cover the collateral assignment change beneficiaries

surrender the policy

A currently insured worker is eligible for which of the following Social Security benefits? survivor death benefits and disability benefits survivor death benefits, disability benefits, and retirement benefits survivor death benefits only retirement benefits only

survivor death benefits only

Bob's insurance goal is to provide additional death benefit protection for his family in case he dies while his children are young. What type of life insurance is best suited to this need? term life insurance whole life insurance business life insurance group life insurance

term life insurance

Kevin tells his insurance agent that he wants a life insurance policy that will last for his entire lifetime as long as he pays the premiums, will maintain a level premium, and will generate a cash value. This may describe any of the following types of policy, EXCEPT: term life insurance variable life insurance ordinary whole life insurance industrial whole life insurance

term life insurance

George purchased an annuity that will provide his wife, Anna, with monthly income payments for as long as she lives. In this scenario, what is Anna called? the annuitant the agent the beneficiary the owner

the annuitant

What is the name of the period during which funds are paid out of an annuity contract in the form of periodic income payments? the annuity payout period the annuity payout the accumulation period the benefit period

the annuity payout period

A life insurance application's main purpose is to provide underwriters with information regarding: the type of policy being applied for the reason for the requested coverage the applicant's wealth the applicant's personal risk data and health

the applicant's personal risk data and health

What does the length of an annuity's surrender charge period depend on? the contract design the age of the annuitant the period selected by the owner when the annuity is purchased the age of the beneficiary

the contract design

The IRS encourages the use of annuities for long-term retirement savings, which is why it imposes a penalty tax on deferred annuity withdrawals that occur before: the contract owner begins collecting Social Security retirement benefits the contract owner reaches age 62 the annuitant reaches his or her Social Security full retirement age the contract owner reaches age 59½

the contract owner reaches age 59½

From an insurance perspective, the term "loss exposure" means: the extent to which an insurer discloses its marketing practices the extent to which an insurer is subject to a possible loss the extent to which insurers are required to open their financial books for public inspection the extent to which an insurer discloses the components making up its policy premium rates

the extent to which an insurer is subject to a possible loss

With certain limitations, a policyowner may change all of the following in a life insurance policy, EXCEPT: the mode of premium payment the incontestability provision the policyowner the beneficiaries

the incontestability provision

In a participating life insurance policy, the insurance company pays the policyowner a dividend out of which of the following? the company's cash reserves set amounts prescribed in the policy the policyowner's life insurance policy cash value the insurer's divisible surplus

the insurer's divisible surplus

In a third-party life insurance contract, the parties to the contract are the: the insured, the beneficiary, and the insurance company the owner, the insured, and the insurance company the insurance company, the owner, and the beneficiary the owner, the insured, and the beneficiary

the owner, the insured, and the insurance company

What is the primary difference between a revocable and an irrevocable beneficiary? the policyowner's ability or inability to change the beneficiary designation the requirement for the insurer to tell the beneficiary if the insured has moved the policyowner's responsibility to pay the premiums the company's responsibility to notify the insured about any changes in its financial condition

the policyowner's ability or inability to change the beneficiary designation

Life insurance is commonly used for all the following needs, EXCEPT: to pay a death benefit to beneficiaries when the insured person dies to replace the insured's future income lost upon death to pay final expenses incurred by the insured immediately prior to, and upon, the insured's death to save for a new car in several years.

to save for a new car in several years.

To qualify for a benefit from any disability rider, the insured must be temporarily disabled. partially disabled. cognitively disabled. totally disabled.

totally disabled.

When comparing her insurance company's policies to those of Zenith Insurance, Melanie makes a misleading statement to convince an insurance prospect to terminate a policy with Zenith and buy one from Melanie's company. What prohibited practice has Melanie engaged in? unfair discrimination defamation rebating twisting

twisting

How long is the standard incontestability period? one year from the application date two years from the date of issue five years from the date of issue 31 days from the date of issue

two years from the date of issue

Deferred annuities accumulate funds for future distribution. Under what circumstances are these funds forfeitable to the insurer? only if the contract is surrendered during the surrender charge period only at the annuitant's death, if it occurs before the annuity starting date under no circumstances only if the owner stops paying premiums

under no circumstances