MI Agent ExamFX
What is the minimum civil fine per violation of the Insurance Code of this state?
$1,000
What is the maximum fine for submitting a false or fraudulent claim to the insurer?
$1,000.
Articles of merchandise are allowed as gifts to insurance applicants as long as they do not exceed what maximum amount?
$10.
If an insurance agent has made a misrepresentation or incomplete comparison of policies for the purpose of inducing a potential client to purchase an insurance policy, the agent may be assessed a fine of up to
$2,000.
What is the minimum civil fine for violating a cease and desist order?
$20,000
How much is an agent's appointment fee?
$5
An insured purchased a variable life insurance policy with a face amount of $50,000. Over the life of the policy, stock performance declined and the cash value fell to $10,000. If the insured dies, how much will be paid out?
$50,000
An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1; however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy?
$9,800.
If an agent's license was revoked for violations of the statutes on rebating or illegal inducement, how soon after the date of revocation can the agent apply for a new license?
1 year.
A policyowner cancels his life policy but instructs the insurance company to transfer the cash value of his policy to an annuity. This nontaxable transaction is called what?
1035 Exchange.
Within what time period after completing pre-licensing education must and applicant file a certificate of education completion with the Commissioner?
12 months.
If an insurer terminates a producer, the Commissioner will receive a notification. Within how many days of this notification must the producer be sent a copy?
15
An insurer wishes to appoint a producer, it must file a notice of appointment within how many days of the date that the contract is executed?
15 days.
A temporary license in this state is valid for a maximum of how many days?
180
Within how many days a Licensee have to inform the Commissioner of a change of address
30
When an employee terminates coverage under a group insurance policy, coverage continues in force for how long?
31 days.
For how many years is an insurer required to maintain a complete file of its advertisements?
4 years.
In order to qualify for conversion from a group life policy that has been terminated to an individual policy of the same coverage, a person must have been insured under the group plan for how many years?
5 years.
The Commissioner has determined that a producer is ineligible for appointment by an insurer. The Commissioner must notify the insurer within how many days?
5.
An IRA uses immediate annuities to pay out benefits; the IRA owner is nearly 75 years old when he decides to collect distributions. What kind of penalty would the IRA owner pay?
50% tax on the amount not distributed as required.
At times, it is possible for a life insurance agent to affect a savings of premium rates by back dating an application for life insurance. what is maximum amount of time that an application may be back dated?
6 months.
What is the waiting period on a Waiver of Premium rider in life insurance policies?
6 months.
What is the least amount of time a life policy can allow for insureds to take legal action against their insurer for a particular act?
6 years
If a licensee does not earn 24 hours of Continuing Education by the license review date, the license will be suspended for up to how many days?
90 days.
Licensees who are currently licensed, and have recently become residents of the state of Michigan may not have to complete an pre-licensing education. To qualify for this exemption, they must apply to become resident licensees within a few days of establishing a legal residence in how many days?
90 days.
Most agents try to collect the initial premium for submission with the application. When an agent collects the initial premium from the applicant, the agent should issue the applicant what?
A Premium Receipt.
According to the Entire Contract provision, a policy must contain
A copy of the original application for insurance.
If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes what?
A guaranteed insurability rider.
A Straight Life policy has what type of premium?
A level annual premium for the life of the insured.
An insurer who violates the Insurance Code statues on illegal inducement is guilty of what?
A misdemeanor.
All of the following will terminate a producer's certificate of appointment EXCEPT what?
A new Commissioner or Director is put into office.
A policy that does NOT pay dividends to policyowners is what?
A nonparticipating policy.
When J. applied for a life insurance policy, the agent informed him that a medical exam would be required. The exam may be completed by
A paramedic or examining physician at the insurer's expense.
Which person is required to hold a producer license?
A person who negotiates insurance contracts.
The term "illustration" in a life insurance policy refers to what?
A presentation of nonguaranteed elements of a policy.
In this state, a temporary license may be issued for any of the following reasons EXCEPT what?
A producer's retirement.
Which of the following provisions would NOT be allowed as part of a life insurance policy issued in Michigan?
A provision that allows the effective date of the policy to be backdated up to 8 months in order to effect a lower premium rate for the insured.
Wo would be required to be licensed as an insurance producer?
A salaried employee who advertises and solicits insurance.
Which of the following is NOT an allowable 1035 exchange?
A whole life insurance policy is exchanged for a term life insurance policy.
What are the two types of contract assignments?
Absolute and collateral.
A license may be denied, suspended , or revoked if the licensee does any of the following EXCEPT what?
Accidentally misspells the name of the insurance policy in a written communication to a customer.
At age 30, an applicant wants to start an insurance program, but realizing that his insurance needs will likely change. He wants a policy that can be modified to accommodate those changes as they occur. Which of the following policies would most likely fit his needs?
Adjustable Life.
An insured misstates her age at the time the life insurance application is taken. This misstatement may result in
Adjustment in the amount of the death benefit.
Which of the following is another term for an authorized insurer?
Admitted.
What documentation grants express authority to an agent?
Agent's contract with the principal.
All of the following would be considered rebating EXCEPT what?
An agent misrepresents policy benefits to convince a policyowner to replace policies.
In insurance, an offer is usually made when
An applicant submits an application to the insurer.
Which of the following applicants could the insurer charge a higher rate of premium and not violate regulations regarding unfair discrimination?
An applicant who is a smoker.
A loss resulting from which of the following would qualify for the accidental death rider coverage?
An automobile accident.
Who can make changes to the policy once it is in effect?
An executive officer of the insurer.
The minimum interest rate on a equity indexed annuity is often based on what?
An index like Standard & Poor's 500.
Who can make a fully deductible contribution to a traditional IRA?
An individual not covered by an employer-sponsored plan who has earned income.
The LEAST expensive first-year premium is found in which of the following policies?
Annually Renewable Term
In an annuity, the accumulated money is converted into a stream of income during which phase?
Annuitization period.
Which is a short-term annuity that limits the amounts paid to a certain fixed period or until a certain fixed amount is liquidated?
Annuity certain.
Which concept is associated with "exclusion ratio"?
Annuity payments.
Which of the following is NOT true of Section 1035 Policy Exchanges?
Any exchange made under Section 1035 of the Internal Revenue Code must be completed within 30 days.
Employer contributions made to a qualified plan
Are subject to vesting requirements.
The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective?
As of the application date.
Which of the following is INCORRECT regarding a $100,000 20-year level term policy?
At the end of 20 years, the policy's cash value will equal $100,000.
If during the underwriting process an insurer obtains personal information about an applicant from the applicant, when must the insurer provide notice of its information practices?
At the time of policy delivery.
An insurer that holds a Certificate of Authority in the state in which it transacts business is considered a/an
Authorized insurer.
Which of the following is NOT true regarding an annuity certain?
Benefits stop at the annuitant's death.
What is the time period called during which the surviving spouse does NOT receive Social Security income benefits?
Blackout period.
What best describes fixed-period settlement option?
Both the principal and interest will be liquidated over a selected period of time.
Which of the following could be used when a business, association, partnership, or limited liability partnership acts as a producer?
Business Entity.
Which of the following would describe a legal document which would dictate who can buy a deceased partner's share of a business and for what amount?
Buy-sell agreement.
Which of the following statements concerning buy-sell agreements is true?
Buy-sell agreements are normally funded with a life insurance policy.
How are state Insurance Guaranty Associations funded?
By their members - authorized insurers.
An insured receives an annual life insurance dividend check. What term best describes this arrangement?
Cash option.
What limits the amount that a policy owner may borrow from a whole life insurance policy
Cash value.
The Commissioner finds that a producer is violating the Insurance Code by frequently using rebates as an incentive for clients to purchase policies. What may the Commissioner issue after a hearing confirms the producer's guilt?
Cease and desist order.
Which of the following would require an individual to stop participating in a specific activity if the Commissioner believes it to be violating the Insurance Code?
Cease and desist order.
All of the following are duties and responsibilities of producers at the time of application EXCEPT what?
Change any incorrect statement on the application by personally initialing next to the corrected statement.
When a policyowner designates a group of individuals as the beneficiary of a life insurance death benefit without specifically naming the individuals, this is called what?
Class designation.
A banker is ready to close on a customer's loan. The bank is prepared to offer the loan but only if the customer purchases an insurance policy from the bank in the amount of the loan. This is an example of what?
Coercion.
Forcing a client to buy insurance from a particular lender as a condition of granting a loan is defined as what?
Coercion.
A business owner was trying to obtain a bank loan to fund the purchase of a new business facility, but the bank required proof of additional assets to secure the loan. The business owner then decided to use her $250,000 life insurance policy to secure the loan. Which provision makes this possible?
Collateral Assignment.
M, who is not licensed as an insurance agent, works part-time in her father's insurance agency. M may perform all of the following duties EXCEPT what?
Collect premiums for in-force policies and explain coverages to clients that may have existing policies written by her father.
All of the following are penalties for submitting fraudulent claims to the insurer EXCEPT what?
Community service.
An applicant knowingly fails to communicate information that would help an underwriter make a sound decision regarding coverage. This is an example of what?
Concealment.
What term best describes the act of withholding material information that would be crucial to an underwriting decision?
Concealment.
An insurance contract requires that both the insured and insurer meet certain conditions in order for the contract to be enforceable. What contract characteristic does this describe?
Conditional.
The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract?
Conditional.
Which of the following would be considered an illegal inducement to purchase insurance?
Confirming future dividends in a life insurance proposal.
All of the following are true of a nonqualified deferred compensation plan EXCEPT what?
Contributions are tax deductible.
A long stretch of national economic hardship causes a 7% rate of inflation. A policyowner notices that the face value of her insurance policy has also raised 7%. What policy rider would cause this change?
Cost of Living rider.
A key person insurance policy can pay for which of the following?
Costs of training a replacement.
What happens when a policy is surrendered for its cash value?
Coverage ends and the policy cannot be reinstated.
Which of the following will NOT be an appropriate of use of a deferred annuity?
Creating an estate.
What is another name for interest-sensitive whole life insurance?
Current assumption life.
Which is NOT fundable by annuities?
Death benefits.
Which of the following losses would most likely be covered under the Accidental Death rider?
Death cause by a head-on collision.
Which of the following is NOT typically excluded from life policies?
Death due to plane crash for a fare-paying passenger.
Which of the following is NOT an example of a valid insurable interest?
Debtor in the life of the creditor.
If an insured changes his payment plan from monthly to annually, what happens to the total premium?
Decreases.
An insurance producer did not renew her license when it was due, so it lapsed. Two month prior, the producer sold several insurance policies and was still awaiting commissions. Now that the producer is no longer licensed, which is true regarding the commissions from the sale of insurance policies?
Deferred commissions may be paid to the producer for policies sold while she was licensed.
Which of the following will NOT be considered discrimination by insurers?
Discriminating in benefits and coverages based on the insured's habits and lifestyle.
Two individuals are in the same risk and age class; yet, they are charged different rates for their insurance policies due to an insignificant factor. What is that called?
Discrimination.
When twin brothers applied for life insurance from Company A, the company found that while neither of them smoked and both had a very similar lifestyle, one of the twins was in a much stronger financial position than the other. Because of this, the company charged him an higher rate for his insurance. What is this practice considered as?
Discrimination.
All of the following statements concerning dividends are true EXCEPT
Dividend amounts are guaranteed in the policy.
Which of the following is true regarding taxation of dividends in participating policies?
Dividends are not taxable.
All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT what?
Dividends from a mutual insurer.
In group life policies, a certificate of insurance is given to whom?
Each insured person.
An adjustable life policy can assume the form of what type of insurance?
Either term insurance or permanent insurance.
If an annuitant dies before annuitization occurs, what will the beneficiary receive?
Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount.
For a retirement plan to be qualified, it must be designed for the benefit of who?
Employees.
All of the following statements are true regarding tax-qualified annuities EXCEPT what?
Employer contributions are not tax deductible.
When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount?
Equal to the original policy for as long as the cash values will purchase.
An annuity owner is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that will equal the performance of the Standard and Poor's 500 Index. She would likely purchase a(n)
Equity Indexed Annuity.
ABC Insurance Company receives an incomplete insurance application and issues the policy anyway. Six months later, ABC realizes the missing information. What term is used that prevents ABC from forcing the policyowner to answer further questions?
Estoppel
Which of the following best describes the aleatory nature of an insurance contract?
Exchange of unequal values.
If an agent follows the rules and terms of his agent contract, what is he exercising?
Expressed authority.
Which nonforfeiture option has the highest amount of insurance protection?
Extended Term.
When a whole life policy is surrendered for its nonforfeiture value, what is the automatic option?
Extended term.
Circulating deceptive sales material to the public is what type of Unfair Trade Practice?
False Advertising.
J applied for a life insurance policy on January 10th. the policy was issued on January 31st. J's agent was vacationing at the time the policy was issued, so J did not receive the policy until February 18. J decides that he does not want the policy. When would J need to return to the insurer in order to receive a full refund of the premium paid?
February 28th, or 10 days after the time the policy is delivered.
If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select?
Fixed Period.
Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits?
Fixed amount.
Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid
For 20 years or until death, whichever occurs first.
If taken as a lump sum, life insurance proceeds to beneficiaries are passed as what?
Free of federal income taxation
In direct transfer, how is money transferred from one retirement plan to a traditional IRA?
From trustee to trustee.
Which of the following would NOT be considered rebating?
Giving an applicant a $5 pen with the insurer's logo during the insurance application process.
Which of the following policies is characterized by a provision where the premiums are lower in the early years of the policy and increase over time to a point where they become level for the remainder of the policy?
Graded premium whole life.
Which of the following terms best describe the coverage by the term policies, as compared to any other form of protection?
Greatest.
In life insurance policies, cash value increases
Grow tax deferred.
An individual is purchasing a permanent life insurance policy with a face value of $25.000. While this is all the insurance he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which option should be included in the policy?
Guaranteed Insurability option
A Universal Life insurance policy has two types of interest rates that are called what?
Guaranteed and Current
At the time the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability, this rider is called what?
Guaranteed insurability.
According to the nonforfeiture law, if the owner decides to surrender a deferred annuity prior to annuitization, which of the following is the owner entitled to?
Guaranteed surrender value.
All of the following information needs to be included on and application for life insurance EXCEPT what?
Health insurance policies in force.
Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation?
Human life value approach (HLVA).
An insured purchased a life insurance policy on his life naming his wife as primary beneficiary, and his daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?
If the primary beneficiary predeceased the insured.
An insurer publishes intimidating brochures that portrays their competition as financially and professionally unstable. Which of the following best describes this act?
Illegal under any circumstances.
An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice?
Illegal.
Which authority is NOT stated in an agent's contract but is required for the agent to conduct business?
Implied.
What does life income joint and survivor settlement option guarantee?
Income for 2 or more recipients until they die.
What is the tax consequence of amounts received from a Traditional IRA after the money was left in the tax-deferred account by the beneficiary?
Income tax on distributions and no penalty
Annually renewable term policies provide a level death benefit for a premium that does what?
Increases annually.
What type of insurance would be used for a Return of Premium rider?
Increasing Term.
What type if insurance would be used for a Return of Premium rider?
Increasing term.
An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of a report is that?
Inspection report.
Under which of the following annuity options does the annuitant select the time period for the benefits, and the insurer determines how much each payment will be?
Installments for a fixed period.
To purchase insurance, the policyowner must face the possibility of losing money of something of value in the event of loss. What is this concept called?
Insurable interest.
What are the two components of a universal policy?
Insurance and cash account
Which statement regarding insurable risks is NOT correct?
Insureds cannot be randomly selected.
Which of the following ultimately determines the interest rates paid to the owner of a fixed annuity?
Insurer's guaranteed minimum rate of interest.
The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose?
Interest only option.
An insured purchased a Life Insurance policy. The agent told him that depending upon the company's investments and expense factors, the cash values could change from those shown in the policy at issue time. The policy is a/an
Interest-sensitive Whole Life.
During partial withdrawal from a universal life policy, which portion will be taxed?
Interest.
State law specifically prohibits using illegal inducements in the marketing of insurance. All of the following would be considered illegal inducements EXCEPT what?
Inviting prospective clients to the grand opening of the company's new office.
Which of the following best describes a misrepresentation?
Issuing sales material with exaggerated statements about policy benefits.
Michigan's continuing education requirement has each of the following characteristics EXCEPT
It allows for up to 15 excess credit hours to be carried forward to the next reporting period.
A whole life policy is surrendered for a reduced paid-up policy. What happens to the cash value in the new policy?
It continues to increase.
What would be the advantage to naming a contingent (or secondary) beneficiary in a life insurance policy?
It determines who receives policy benefits if the primary beneficiary is deceased.
Which of the following is NOT true regarding the Life with Guaranteed Minimum annuity settlement option?
It does not guarantee that the entire principal amount will be paid out.
Why is an equity indexed annuity considered to be a fixed annuity?
It has a guaranteed minimum interest rate.
Which of the following is TRUE of a qualified plan?
It has a tax benefit for both employer and employee.
What is the benefit of choosing extended term as a nonforfeiture option?
It has the highest amount of insurance protection.
All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT
It is a life contingency option.
Which statement is TRUE regarding the accumulation period of an annuity?
It is a period during which the payments into the annuity grow tax deferred.
What does it mean if a retirement plan or annuity is "qualified"?
It is approved by the IRS.
Which of the following is NOT true regarding a Certificate of Authority?
It is issued to group insurance participants.
In which of the following situations is legal to limit coverage based on marital status?
It is never legal to limit coverage based on marital status.
If an insured surrenders his life insurance policy, which statement is true regarding the cash value of the policy?
It is only taxable if the cash value exceeds the amount paid for premiums.
When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy?
It is reduced to the amount of what the cash value would buy as a single premium.
Which is NOT true regarding a nonqualified retirement plan?
It needs IRS approval.
What is a true statement regarding a single life settlement option?
It provides income that the beneficiary cannot outlive.
Which of the following is true about the premium on the children's rider in a life insurance policy?
It remains the same no matter how many children are added to the policy.
In the underwriting process, it was determined that the applicant for life insurance is in poor health and has some dangerous habits. Which of the following is true concerning the policy premium?
It will likely be higher because the applicant is a substandard risk.
Which statement is NOT true regarding a Straight Life policy?
Its premium steadily decreases over time, in response to its growing cash value.
A couple receives a set amount of income from their annuity. When the wife dies, the husband no longer receives annuity payments. What type of annuity did they buy?
Joint Life.
A couple near retirement is planning for their golden years. They want to make sure that their retirement annuity provides monthly benefits for the rest of their lives. Should one of them die, the other would still like to continue receiving benefits. Which settlement option should they choose?
Joint and Survivor.
For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become what?
Larger.
A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this?
Level term.
Which of the following is NOT a type of whole life insurance?
Level term.
The form of life annuity which pays benefits throughout the lifetime of the annuitant and also guarantees payment for a minimum number of years is called what?
Life income with period certain.
Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payment will continue to a designated beneficiary?
Life income with period certain.
Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary?
Life income with period certain.
Which of the following would be the best option that would help the surviving spouse of the insured to put her child through daycare after the insured's death?
Life insurance proceeds.
An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it?
Limited-pay Life.
If an annuitant selects the straight life annuity settlement option, in order to receive all of the money out of the contract, what would it be necessary to do?
Live at least to their life expectancy.
Which rider is added to a life insurance policy to pay part of the death benefit to the insured to cover expenses incurred in a nursing or convalescent home?
Long-term care
Insurance is a contract by which one seeks to protect another from what?
Loss.
Which of the following statements is TRUE concerning whole life insurance?
Lump-sum death benefits are not taxable.
Which is NOT considered a misrepresentation as it pertains to unfair trade practices?
Making comparisons between different policies.
Which of the following best describes the unfair trade practice of defamation?
Making derogatory oral statements about another insurer's financial condition.
Which of the following is NOT included in the General Information section of the application for insurance?
Medical background.
Guaranteeing future dividends is considered to be an unfair or deceptive act known as what?
Misrepresentation.
On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. The company is quilty of what?
Misrepresentation.
On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. What is the company guilty of?
Misrepresentation.
Which of the following, upon conviction, carries a fine of up to $2,000 for each violation?
Misrepresenting the terms of a policy.
B just bought a new car, which he anticipates will be paid for 4 years from now. He also wants to buy a life insurance policy, but is financially limited until the car is paid off. Which of the following types of policies would be best for B?
Modified Life.
What is an UNTRUE statement regarding policy loans?
Money borrowed from the cash is taxable.
Which of the following is NOT true regarding policy loans?
Money borrowed from the cash value is taxable.
All of the following are factors that an underwriter could use to select and classify risk EXCEPT
National origin.
Attempting to determine how much insurance a family would require based upon their financial objectives is known as
Needs approach.
How many hours of Continuing Education are required to maintain a counselor's license?
None.
What are cash value guarantees in a whole life policy called?
Nonforfeiture values.
An out-of-state producer wants to start selling insurance in this state. What type of license should the producer obtain?
Nonresident.
Under a straight life annuity, if the annuitant dies before the principal amount is paid out, the beneficiary will receive what?
Nothing; payments will cease.
Which of the following documents must be provided to the policy owner or applicant during policy replacement?
Notice regarding replacement.
During replacement of life insurance, a replacing insurer must do which of the following?
Obtain a list of all life insurance policies that will be replaced.
Which statement best describes agreement as it pertains to insurance contracts?
One party accepts the exact terms of the other party's offer.
The dividend option in which the policy owner uses dividends to purchase a term policy for one year is referred to as what?
One-year term option.
Under a pure life annuity, an income is payable by the company
Only for the life of the annuitant.
Which Universal Life option has a gradually increasing cash value and a level death benefit?
Option A.
Which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy?
Owner's rights.
An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosen is called what?
Paid-up additions.
Which dividend option increases the death benefit?
Paid-up additions.
An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do?
Pay a reduced death benefit.
An insurer that does not pay a death benefit in a timely manner as required by law, will be required to do what?
Pay the beneficiary an interest penalty from the date of the insured's death.
An insured purchased a life policy in 2010 and died in 2020. The insurance company discovers at the time that the insured had misstated information about her insurance history on the application. What will the insurer do?
Pay the death benefit.
A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will do what?
Pay the policy proceeds only if it would have issued the policy.
What is another term for the accumulation period of an annuity?
Pay-in period.
An individual buys a flexible premium deferred life annuity with 20 year period certain. What would his beneficiary receive if he dies 5 years after beginning the annuity phase?
Payments for 15 years.
Which is NOT true about a joint and survivor annuity benefit option?
Payments stop after the first death among the annuitants.
Which rider would NOT cause the Death Benefit to increase?
Payor Benefit Rider.
Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?
Payor Benefit.
If someone wants to buy a life insurance policy that will provide lifetime protection against premature death, which type of life insurance policy, should that person buy?
Permanent.
Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value?
Predicted needs of the family after the insured's death.
What is the term for how frequently a policyowner is required to pay the policy premium?
Premium Mode.
In a group life policy with a death benefit of more than $50,000, what happens?
Premium cost above $50,000 is taxable as income to the employee.
Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?
Premiums are not tax deductible as a business expense.
What is the term for the entity that an agent represents regarding contractual agreements with third parties
Principal.
The following areas are regulated by the Insurance Department EXCEPT for what?
Producer commission schedules.
A couple owns a life insurance policy with a Children's Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability?
Proof of insurability is not required.
When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to do what?
Purchase a single premium policy for a reduced face amount.
What form of the annuity settlement options provides payments to an annuitant for the rest of the annuitant's life and ceases at the annuitant's death?
Pure Life.
The risk of loss may be classified as
Pure Risk and Speculative Risk
Which of the following best describes a pure life annuity settlement option?
Pure life provides payments for as long as the annuitant is alive.
which of the following best describes a pure life annuity settlement option?
Pure life provides payments for as long as the annuitant is alive.
Another name for substandard risk classification is what?
Rated.
All of the following are true regarding rebates EXCEPT what?
Rebates are allowed if it is in the best interest of the client.
An agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. What is the agent guilty of?
Rebating.
Which nonforfeiture option provides coverage for the longest period of time?
Reduced paid-up.
The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this?
Reduction of premium.
Following a career change, an insured is no longer required to perform many physical activities, so he has implemented a program where he walks and jogs for 45 minutes each morning. The insured has also eliminated most fatty foods from his diet. Which method of dealing with risk does this scenario describe?
Reduction.
Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance?
Replacement rule.
An applicant for a disability insurance policy has a heart condition which they are unaware and therefore answers no to the question pertaining to heart problems on their application. What is their answer considered as?
Representation.
In case of a loss, the indemnity provision in insurance policies does what?
Restores an insured person to the same financial state as before the loss.
If an insured purchases an insurance policy with a large deductible, what risk management technique is the insured exercising?
Retention.
Which of the following describes attachments made to policies that either add or modify coverage?
Riders.
Insurance is the transfer of what?
Risk
Adverse selection is a concept best described as what?
Risks with higher probability of loss seeking insurance more often than other risks.
Which type of retirement account does not require the owner to start taking distributions at age 72?
Roth IRA
To sell variable life insurance policies, an agent must receive all of the following EXCEPT this
SEC registration.
What part of the Internal Revenue Code allows an owner of a life insurance policy or annuity to exchange or replace their current contract with another contract w/o creating adverse tax consequences?
Section 1035 Policy Exchange.
The Ownership provision entitles the policyowner to do all of the following EXCEPT what?
Set premium rates.
It would be considered unfair discrimination to ask an insurance applicant about which of the following and then use that information as a rating factor to determine insurability?
Sexual Orientation.
All of the following are considered unfair trade practices in the business of insurance EXCEPT what?
Sharing Commissions.
All of the following are considered unfair trade practices in the business of insurance EXCEPT
Sharing commissions
Upon policy delivery, the producer may be required to obtain any of the following EXCEPT
Signed waiver of premium.
Which settlement option provides a single beneficiary with income for the rest of his/her life?
Single Life.
An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called what?
Single Premium whole life.
Which two terms are associated directly with the way an annuity is funded?
Single payment or periodic payments.
A licensed counselor MAY NOT perform what duty?
Solicit business as a insurance producer.
Which of the following statements is correct about a standard risk classification in the same age group and with similar lifestyles?
Standard risk is representative of the majority of people.
Which types of annuities will generally provide the highest monthly income?
Straight Life.
Your client is planning to retire. She has accumulated $100,000 in a retirement annuity, and now wants to select the benefit option that will pay the largest monthly amount for as long as she lives. As her agent, what should you recommend?
Straight life.
Your client is planning to retire. She has accumulated $100,000 in a retirement annuity, and now wants to select the benefit option that will pay the largest monthly amount for as long as she lives. As her agent, you should recommend what?
Straight life.
During the accumulation period in a nonqualified annuity, what are the tax consequences of a withdrawal?
Taxable interest will be withdrawn first and the 10% penalty will be imposed if under the age 59 1/2.
The interest earned on policy dividends is
Taxable.
All of the following would be different between qualified and nonqualified retirement plans EXCEPT what?
Taxation on accumulation.
Which of the following best describes taxation during the accumulation period of an annuity?
Taxes are deferred.
Which of the following types of insurance policies would provide the greatest amount of protection for a temporary period during which an insured will have limited financial resources?
Term.
Nonforfeiture values guarantee which of the following for the policyowner?
That the cash value will not be lost.
The automatic premium loan provision is activated at the end of what?
The Grace Period.
All of the following entities regulate variable life policies EXCEPT who?
The Guaranty Association
A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. What should the policyowner have her husband named as?
The Revocable Beneficiary.
An applicant buys a nonqualified annuity, but dies before the starting date. For which of the following beneficiaries would the interest accumulated in the annuity NOT be taxable?
The Spouse.
Whose responsibility is it to make certain that an application for insurance is filled out completely and correctly?
The agent/producer
A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true?
The amount of the distribution is reduced by the amount of a 20% withholding tax.
Which of the following is NOT true regarding the annuitant?
The annuitant cannot be the same person as the annuity owner.
All of the following statements about equity annuities are correct EXCEPT
The annuitant receives a fixed amount of return.
All of the following statements about equity index annuities ae correct EXCEPT what?
The annuitant receives a fixed amount of return.
In a fixed annuity, which statement is true regarding the guaranteed interest rate on the investment?
The annuitant will receive the higher of either the guaranteed minimum rate or the current rate.
What is the exclusion ratio used to determine?
The annuity benefit to be excluded from taxes.
Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean?
The beneficiary will only receive payments of the interest earned on the death benefit.
An applicant signs an application for a $25,000 life insurance policy, pays the initial premium and receives a conditional receipt. If the applicant dies the next day, which of the following is TRUE?
The beneficiary will receive the full death benefit if it is determined that the applicant qualified or the policy.
The annuitant dies while the annuity is still in the accumulation stage. Which of the following is TRUE?
The beneficiary will receive the greater of the money paid into the annuity or the cash value.
If the annuitant dies during the accumulation period, who will receive the annuity benefits?
The beneficiary.
In a group life policy, the employer may select all of the following EXCEPT what?
The beneficiary.
The primary beneficiary of her husband's life policy found that no settlement option was stated in the policy on the date of her husband's death. Who will select the settlement option in this case?
The beneficiary.
In a case where the primary beneficiary predeceases the insured, in the event of the insured's death, the death benefit proceeds will be paid to whom?
The contingent beneficiary.
An Adjustable Life policyowner can change which of the following policy features?
The coverage period.
What determines the penalty for surrendering a market value adjusted annuity prematurely?
The current interest rate at time of surrender.
An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later, the applicant had to submit a medical exam. If the policy is issued, what would be the policy's effective date?
The date of the medical exam.
The policyowner of an adjustable life policy wants to increase the death benefit. What must the they do for this to happen?
The death benefit can be increased by providing evidence of insurability.
If an insured withdraws a portion of the face amount in the form of accelerated benefits because of a terminal illness, how will that affect the payable death benefit from the policy?
The death benefit will be smaller.
What method is used to determine the taxable portion of each annuity payment?
The exclusion ratio.
Life insurance creates an immediate estate. What best explains this statement?
The face value of the policy is payable to the beneficiary upon the death of the insured.
The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as what?
The incontestability clause.
An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT?
The insured may choose to convert to term or permanent individual coverage.
An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible?
The insured will need a written consent of the insurer.
With Adjustable life insurance, the owner can change everything EXCEPT what?
The insured.
Which of the following is generally NOT considered when underwriting group insurance?
The insureds' medical history.
An employee quits his job on May 15 and doesn't convert his Group Life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. Which of the following statements best describes what will happen?
The insurer will pay the full death benefit from the group policy to the beneficiary.
All of the Following are TRUE statements regarding the accumulation at interest option EXCEPT
The interest is not taxable since it remains inside the insurance policy.
Not all losses are insurable, and there are certain requirements that must be met before a risk is a proper subject for insurance. These requirements include all of the following EXCEPT
The loss may be intentional
What is the advantage of reinstating a policy instead of applying for a new one?
The original age is used for premium determination.
Which of the following is true regarding a market value adjusted annuity?
The owner is guaranteed a fixed interest rate for a specific period of time.
Which statement is true regarding a market value adjusted annuity?
The owner is guaranteed a fixed interest rate for a specific period of time.
All of the following are true of an annuity EXCEPT what?
The owner must be the party to receive benefits.
All of the following are true of an annuity owner EXCEPT what?
The owner must be the party to receive benefits.
Traditional IRA contributions are tax deductible based on what?
The owner's income.
All of the following statements are true regarding installments for a fixed amount EXCEPT
The payments will stop when the annuitant dies.
What is the annuity period?
The period of time during which accumulated money is converted into income payments.
Which of the following is NOT true regarding competent parties involved with insurance?
The person must have completed secondary education.
All of the following are true of key person insurance EXCEPT
The plan is funded by permanent insurance only.
An individual applies for a life policy. Two years ago, he suffered a head injury from an accident so he cannot remember parts of his past, but is otherwise competent He has also ben hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history one year later. What will probably happen?
The policy will not be affected.
Which of the following statements is correct regarding a whole life policy?
The policyowner is entitled to policy loans.
The Commissioner may waive pre-licensing requirements of examinations for someone who has been a licensed producer in what time frame?
The preceding 12 months.
Which is true about a spouse term rider?
The rider is usually level term insurance
Under an extended term nonforfeiture option, the policy cash value is converted to what?
The same amount as in the whole life policy.
Under an extended term insurance policy, the policy cash value is converted to
The same face amount as in the whole life policy.
Which of the following determines the length of time that the benefits will be received under the Fixed-Amount settlement option?
The size of each installment.
A temporary producer license could be issued without examination for all of the following EXCEPT who?
The spouse of a retiring insurance producer.
An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?
The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.
In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT what?
The type of investment.
Which of the following is NOT true regarding Equity Indexed Annuities?
They earn lower interest rates than fixed annuities.
All of the following are requirements for life insurance illustrations EXCEPT what?
They must be part of the contract.
All of the following are true regarding the guaranteed insurability rider EXCEPT what?
This rider is available to all insureds with no additional premium.
Which of the following is the best reason to purchase a life insurance rather than annuities?
To create an estate.
What is the purpose of establishing the target premium for a universal life policy?
To keep the policy in force.
Which of the following is NOT a goal of risk retention?
To minimize the insured's level of liability in the event of loss.
If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it?
Unilateral.
The Waiver of Cost of Insurance rider is found in what type of insurance?
Universal Life.
Which of the following policies would be considered interest sensitive?
Universal Life.
How long will the beneficiary receive payments under the single life settlement option?
Until the beneficiary's death.
Which of the following is a key distinction between variable whole life and variable universal life products?
Variable whole life has a guaranteed death benefit.
An insured receives a monthly summary for his life insurance policy. He notices that the cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have?
Variable.
The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called what?
Waiver of premium.
An insurance company receives an application with some information missing and issues the policy anyway. What is this called?
Waiver.
Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?
Warranty.
In forming an insurance contract, when does acceptance usually occur?
When an insurer's underwriter approves coverage.
When is the earliest a policy may go into effect?
When the application is signed and a check is given to the agent
What is the earliest a policy may go into effect?
When the application is signed and a check is given to the agent.
When would a 20-pay whole life policy endow?
When the insured reaches age 100.
If an applicant for a life insurance policy and the person to be insured by the policy are two different people, the underwriter should be concerned about what?
Whether an insurable interest exists between the individuals.
When an insured terminates membership in the insured group, the insured can convert to what type of insurance coverage?
Whole life without proof of insurability.
Are insurance company underwriters allowed to discriminate?
Yes, but not unfairly.
In Michigan, the state's Continuing Education requirement
consists of completing 24 hours of CE each biennium.
What Type of Life Insurance uses Return of Premium Rider?
term life insurance
How many days does a licensee have to inform the Commissioner of a change of address?
within 30 days.
