Life Insurance Readiness Exam

Decreasing term insurance is often used to

Cover a mortgage

Which of the following is true regarding pure life annuity settlement option?

It provides the highest monthly benefit

Which method of dealing with risk is applied when insurance is purchased?

Transfer

Policies written on a third-party ownership basis are usually written to cover which of the following?

Policyowner's minor children or business associates

Which of the following is a provision found in life insurance policies?

Reinstatement

The family term rider incorporates

Spouse term and children's term

Which of the following is true about how an insurance director gets into office?

The governor appoints the director

A viatical settlement is arranged between a viatical company and

The insurance producer

With Adjustable Life, the owner can change all of the following EXCEPT

The insured

All of the following are true of group life insurance EXCEPT

The insureds each own their own contract

As it relates to life settlements, the term "owner" means

The owner of the original life policy

Which of the following is true regarding a joint life annuity?

The payments stop at the first death

All of the following are general requirements of a qualified plan EXCEPT

The plan must be temporary

All of the following statements about indexed whole life insurance are correct except

The policy face amount remains level throughout the life of the policy

Which of the following bears an investment risk in a variable life insurance policy?

The policyowner

All of the following would be violations of the advertising and sales regulations for life insurance products EXCEPT

Using testimonials

A married couple wants to include the entire family in their whole life policy under one rider. Which of the following riders will help them achieve that goal?

Family term

Which of the following is a correct statement about annuities?

Fixed annuities do not provide protection against inflation

Which of the following terms refers to solicitation, negotiation, effectuation or advising related to an insurance contract?

Insurance transaction

As an insurer's field underwriter, a producer has all of the following responsibilities EXCEPT

Issuing policies on behalf of the insurer

A producer explains a couple of life insurance policies to a prospective insured but does not help to evaluate the costs of similar plans. Which rule is being violated?

Life Solicitation Rule

An insurance agent visits a potential client and explains various types of policies. The customer displays a lack of interest, so the agent guarantees higher dividends than he knows would be possible. Which term describes what the agent has done?

Misrepresentation

An insurance company that is owned by the policyholders is called a

Mutual insurer

An annuitant pays the annuity premium on the 14th of each month. Which of the following best describes this arrangement?

level

What is the limit to the number of 90-day temporary licenses that a person may hold?

no more than 1 per lifetime

According to the Common Disaster clause, if the insured and primary beneficiary are killed in the same accident and it cannot be determined who died first, which of the following will be assumed?

The primary beneficiary died before the insured

In the event a producer is found to have committed rebating, all of the following penalties would apply EXCEPT

The producer will be penalized for committing a class B misdemeanor

An insurance producer fails to meet the Director's continuing education requirement. Which of the following will most likely occur?

The producers license will be terminated.

What is the purpose of the Agent's Report in the application process?

To provide additional information about the applicant to the underwriters

Which of the following policies can be described as a flexible premium adjustable life policy?

Universal Life

According to the Illinois Insurance Code, disclosure rule for life or health insurance solicitation

Applies to all policies and insurance issuers

If an insurance company issues a policy even though some questions on the application were unanswered, when can the insurer get the answers to those questions?

Never; the insurer has waived its right to those answers by issuing the policy

The reduction of premium option uses the dividend to reduce

Next year's premium

If the director serves a notice of a hearing upon an insurer, when must the hearing be held?

No sooner than 20 days and no later than 30 days after the notice is served

Contributions to Roth IRA's are

Not tax deductible

Dividends received on participating life insurance policies are

Not taxable because they are a return of unused premiums

An insured decides to replace his life insurance policy with one offered by a different insurer. Which of the following should the old insurer submit to the new insurer?

Notice regarding replacement

Which of the following best defines the unfair trade practice of rebating?

Offering an inducement of something of value not specified in the policy

Which dividend option will increase the death benefit?

Paid-up additions

Which of the following would be a violation of life policy illustration regulation in Illinois?

Providing customer with an incomplete illustration.

When an agent writes insurance for himself, his spouse, or his own business, this is called

Self-insurance

What does the application of contract of adhesion mean?

Since the insured does not participate in preparing the contract, any ambiguities would be resolved in favor of the insured

Which of the following individuals would be a likely candidate to purchase a deferred annuity?

Someone who wants to grow retirement funds tax deferred

How do premiums in variable universal life policies vary from those in variable whole life policies?

Premiums are flexible

All of the following are valid reasons for denial, suspension or revocation of a producer's license EXCEPT

Selling 25% controlled business

If a producer's license is violated for criminal activity, what is the maximum amount that can be charged for each offense?

$10,000

What is the maximum civil penalty that a producer can be charged if found guilty of violations in a court of law?

$100,000

The Replacement Regulation does not apply to situations in which the total existing coverage to be replaced represents less than

$500

Firms must have producers that will be responsible for their compliance with state laws and regulations. What is the minimum number of producers that must be present in a given firm?

1

How long is the grace period for an individual life insurance policy?

1 month

An applicant for life insurance must receive a Buyer's Guide and policy summary prior to the initial premium payment, unless the policy offers an unconditional refund offer lasting for a minimum of

10 days

How many days is the free-look period in most life insurance policies?

10 days

Within how many days must insurers pay approved claims?

30 days

While completing a life insurance application the applicant realizes that she should have answered an earlier question differently. What should the agent do to make the necessary change?

Cross out the incorrect information, write in the correct answer, and have the applicant initial the change

A whole life policy that will generate immediate cash value is a

Single premium policy

If an applicants health is poorer than that of an average applicant, the policy may be issued

substandard

Which of the following types of insurance products would be appropriate for an individual with a low income and high insurance needs?

term insurance

When replacement is involved, the replacing insurer must send a notice to the existing insurance company that identifies the insured and policies within how many days?

10 days

A producer is required to maintain a Premium Fund Trust Account anytime the producer holds client premiums for more than how many days?

15 days

After a producer's license is revoked, how long of a period must pass before the producer applies for a new license?

3 years

How many days' notice must an insurer provide to an insured regarding the lapse of a policy due to outstanding loans?

30 days

An insured bought an insurance policy that requires him to pay $150 in premiums on the 15th of each month. He then takes an extended vacation and forgets to pay the premium. Ten days later, his policy is still in effect and has not lapsed. Which policy provision allowed for this?

grace period

Any company or person who violates a written order under the Regulatory Examinations section of the Insurance Code may be subject to all of the following penalties EXCEPT

imprisonment

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

insurable interest

Which of the following is a requirement for prelicensing education for producers in this state?

Candidates must complete 40 hours of pre-licensing education

Which of the following entities ultimately determines the extent of a temporary licensee's authority?

Director

A married couple purchase a life insurance policy on their newborn baby. They are concerned about what would happen to the policy if either one of them were unable to continue making the premium payments due to death or disability. Which policy rider should their agent recommend?

Payor benefit

All of the following statements about mutual insurance companies are correct EXCEPT

Policy dividends issued by mutual companies are guaranteed and not taxable

Who can request changes in premium payments, face value, loans, and policy plans?

Policyowner

Within how many days must a producer report his or her felony conviction to the Director?

30 days

Records related to life insurance advertisements must be kept on file by the insurer for what minimum period of time?

5 years

A trust officer of a bank wants to counsel people on their life insurance policies, for a small fee. What licensure must the officer receive in order to do this legally?

none

Key person insurance can provide protection for all of the following economic losses to a business EXCEPT

pay the death benefit to the estate of the insured

All insurance companies are forbidden to do any of the following EXCEPT

require proof of insurability

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

The face amount is paid to the beneficiary

Which of the following is TRUE regarding premium in a 10-year level premium policy?

The premium will remain level for 10 years

When a settlement option is chosen at death, how are the monthly income payment taxed?

The portion of the payment that represents the terminal reserve is income taxable.

A distribution from an employer-sponsored retirement plan or from an IRA is eligible for a tax-free rollover if it is reinvested in an IRA within

60 days

Which of the following would be required to become licensed as an insurance producer?

A customer service representative who solicits no more than one policy a year

All of the following are true about completion of pre licensing training except

A lecture class must be taken to complete a portion of the training

What is the maximum loan amount a policyowner may withdrawal from a variable universal life insurance policy?

An amount not exceeding the cash value

When a whole life policy is surrendered for its nonforfeiture value, what is the automatic option?

Extended term

An adjustable life policy can assume the form of

Either term insurance or permanent insurance

How often must the preparation and posting of records of insurance transactions occur?

Every 30 days

An applicant may challenge information discovered as a result of an investigative consumer report under which of the following Acts?

Fair Credit Reporting Act

Agents may be found guilty of defamation if they make false statements that are intended to

Maliciously criticize another insurance company

An individual receives a lump-sum inheritance. He'd like to use the money to create a lifetime income since he'll be retiring soon. He purchases an annuity and wishes to receive payments beginning in 2 months. What did he buy?

Single Premium Deferred Annuity

In contrasting stock insurers with mutual insurers, which statement is true?

Stock insurers are owned by the shareholders and issue nonparticipating policies

When term insurance is added to the main policy to enhance the policy or provide added benefit or coverage, it is called a

Term rider

Which of the following statements regarding HIV testing is NOT true?

Test results must be sent to the Department of Insurance.

All of the following are true about Group Life insurance EXCEPT

The employer is the beneficiary

Which provision may be added to a permanent life policy, at no cost, that insures that the policy will not lapse so long as there is cash value?

Automatic Premium Loan Option

The owner of a whole life policy with an accidental death rider intentionally kills himself after having the policy for 18 months. What is the insurance company's course of action?

Deny any payment of death benefit

What is the term used for a life insurance provision or rider that allows for the early payment of some portion of the policy's face amount, should the insured suffer from a terminal illness or injury?

Accelerated benefits