Missed Life Insurance Exam Review Questions

What does "liquidity" refer to in a life insurance policy?

Cash values can be borrowed at any time

A failure to report insurance fraud to the commissioner is considered a/an___

Class A Misdemeanor

What entity ultimately determines if an advertisement is deceptive or confusing?

Commissioner

What is another name for interest-sensitive whole life insurance?

Current assumption life

What does the Life and Disability Insurance Guaranty Association guard against?

Insurer Insolvency

Who makes up the Medical Information Bureau?

Insurers

What is misrepresentation?

Issuing, publishing, or circulating any illustration or sales material that is false, misleading, or deceptive

What is the official name for the Social Security Program?

Old Age Survivors Disability Insurance

Which entity keeps a file of all of an insurers advertisements?

The insurer

A producer moves to another state and terminates their residency in Arkansas. The Arkansas producers license must be returned to the Commissioner within how many days?

10 days

What is the maximum period for a temporary license in this state?

180 days

How long is the licensing period in Arkansas?

2 years

When a producer changes address of their residence, the Insurance Department must be notified within

30 days

To attain currently insured status under Social Security, a worker must have earned at least how many credits during the last 13 quarters?

6 credits

A paid-up nonforfeiture benefit will become effective as specified in the policy, unless the person entitled elects another available option within how many days after the due date of the premium in default?

60 days

When handling premium funds, insurance producers are acting in a __

Fiduciary capacity

If a policy allows the policyowner to make periodic adjustments to the face amount at standard rates, without proving insurability, the policy includes a ___?

Guaranteed Insurability Rider

What is an eligibility requirement for all social security disability income benefits

Have attained fully insured status

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

Level Term

What settlement option in life insurance is known as Straight Life

Life Income

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

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

A participating insurance policy may?

Pay dividends to the policyowner

Who is protected from financial loss by the Life and Disability Insurance Guaranty Association?

Policyholders

The purpose of insurance regulation is to

Promote the public welfare

The paid-up addition option uses the dividend to..

Purchase a smaller amount of the same type of insurance as the original policy

When replacement is involved, a producer doesn't have to

Receive a confirmation from the existing insurer

To what organization must all admitted insurers belong?

The life and disability insurance guaranty association

What is the main justification for the existence of the State Insurance Department?

To protect the public

If, after a hearing, the Commissioner finds that a producer has committed any insurance unfair trade practice, the Commissioner may revoke or refuse to renew the producer's license, place the licensee on probationary status, or suspend a licensee for up to

36 months

What is the maximum fine for violating the commissioners cease and desist order?

$10,000

An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one to the other, and what is the tax consequence of a direct transfer?

$10,000, no tax consequence

An individual purchases a $100,000 Joint Life policy on himself and his wife. 8 years later, he dies in a car accident. How much will his wife receive from the policy?

$100,000

What is the maximum fine for a single violation of the Insurance Code if a person knew or should have known that an act would result in a violation?

$5,000

An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy?

$50,000

What is the number of credits required for fully insured status for social security disability benefits?

40

Concerning insurance, the definition of a fiduciary is

A producer/broker who handles insurer funds in a trust capacity

If an insurance producers or consultants license has lapsed,

A reinstatement fee is double the renewal fee

The two types of assignments are

Absolute and Collateral

What is another term for an authorized insurer?

Admitted

In order to get a nonresident license in Arkansas, producers must what?

Apply and pay a fee to a nonresident state that reciprocates

An insurer that holds a Certificate of Authority in the state of which it transacts its business is considered a/an?

Authorized insurer

Who assumes control over an insurance company's funds and management if they become insolvent?

Department of Insurance

What would not be considered a rebate if offered to an insured in the sale of insurance?

Dividends from a mutual insurer

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

What best describes the aleatory nature of an insurance contract?

Exchange of unequal values

A person takes out a loan in order to pay off his house. He dies several years later, having paid off only a portion of the debt. What happens?

If the lender has credit insurance, this amount will be paid to the lender

An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. This practice is?

Illegal

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

Increasing Term

According to agency law, the producer always represents the

Insurance company

What is churning?

Replacing insurance policies for the sole purpose of earning commission

What would help prevent a universal life policy from lapsing?

Target Premium

A 60-year old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. What happens?

The amount of the distribution is reduced by the amount of a 20% withholding tax

Who typically pays for creditor insurance?

The borrower

Which entity ultimately determines if an advertisement is deceptive or confusing?

The commissioner

In credit life insurance, who is the beneficiary?

The creditor

Whos is the policyowner on Credit Life insurance?

The creditor

What benefit option is NOT available under Social Security?

Welfare benefits

When does Arkansas NOT provide a temporary license?

When a producer retires

When would a 20-[ay whole life policy endow?

When the insured reaches age 100

When an insured terminates membership in the insured group, the insured can convert to

Whole life without proof of insurability

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

How long must an insurer's advertisement be kept on file?

For 4 years or until the company's next regular examination, whichever comes later

What is NOT necessary for becoming a nonresident producer in this state?

Passing the licensing examination

A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will ____

Pay the policy proceeds ONLY if it would have issued the policy

How must a replacing producer respond to an applicant wishing to replace existing life insurance?

The producer must provide the applicant with a Notice Regarding Replacement

Insurers must annually pay the divisible surplus, if any, that will accrue to the policyholders on the policy anniversary date. This must occur no later than the end of the

Third policy year

In insurance, an offer is usually made when____

An applicant submits an application to the insurer

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

Fair Credit Reporting Act

What entity is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization?

Fraternal Benefit Society

What happens during the accumulation period of an annuity?

It is a period of time during which the payments into the annuity grow tax deferred

What is NOT considered a misrepresentation as it pertains to unfair trade practices?

Making comparisons between different policies

What is a definition of a Unilateral contract

One-sided: only one party makes an enforceable promise

In the replacement of a policy, who notifies the existing insurer that a policy is being replaced?

The replacing company