Practice

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 plan administrator to another and what is the tax consequence of a direct transfer?

$10,000, no tax consequence

If an agent does not notify the insurer of an address change, what is the maximum penalty that can be imposed for a one-time offense?

$250. If the department is not notified within the required time period, a maximum fine of $250 will be imposed for the first offense; for subsequent offenses, either a minimum fine of $500 will be imposed or the agent's license will be suspended or revoked.

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

$50,000

The minimum age for purchasing life insurance policy in Florida is

15. In Florida, the minimum legal age to enter into a life insurance contract is 15.

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

3 days

If a claim is made on a policy during the grace period, an insurer is allowed to deduct the overdue premium and to charge interest. What is the maximum allowed interest rate?

8%

An individual has just borrowed $10,000 from his bank on a 5 year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation?

A decreasing term policy's face amount decreases as the amount of debt is reduced

A Straight Life policy has what type of premium?

A level annual premium for the life of the insured

Flexible Premium

A policy feature that allows the policyholder to vary premium payments in the amount and/or timing.

What level of authority is given to the Office of Insurance Regulation with respect to examination of insurer's activities to determine compliance Unfair Trade Practice laws?

Absolute. Florida statutes provide the Office of Insurance Regulation with an absolute right to examine the affairs of every person (insurers and licensees) involved in the business of insurance to see if they are engaged in any unfair trade practices.

Which of the following is another term for an authorized insurer?

Admitted Insurers who meet the state's financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer.

Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?

Aleatory

Reduction of premium

An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's' premium, thus reducing it to $900. What option does this describe?

Rebating

Any inducement offered in the sale of insurance products that is not specified in the policy.

In terms of Social Security, what is the interval spanning between the day when the youngest child of a family turns 16 and before the surviving spouse may receive retirement benefits?

Blackout period- begins when the youngest child reaches the age of 16, and ends when the surviving spouse qualifies for retirement benefits, as early as age 60. No benefits are paid during this time.

A producer who fails to segregate premium monies from his own personal funds is guilty of

Commingling

Representations are written or oral statements made by the applicant that are

Considered true to the best of the applicant's knowledge

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

Dividends from a mutual insurer.

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

Which of the following is not a responsibility of the office of insurance regulation?

Enacting new insurance laws. New laws are enacted by the state legislature.

A customer with an existing life insurance contract is considering exchanging it for a newer contract. What Florida insurance regulation should the customer's insurance agent consult?

Florida Replacement Rule

When doing business in this state, an insurance company that is formed under the laws of another state is known as which type of insurer?

Foreign - a foreign insurer is one that is formed under the laws of another state

Life insurance death proceeds are

Generally not taxed as income

What provision in an insurance policy extends coverage beyond the premium due date?

Grace period: mandatory provision in all life/health policies that provides coverage for a period of time after the premium becomes past due.

What kind of policy does not typically require proof of insurability?

Group insurance Individual life insurance is written on a single life. The rate and coverage is based upon the underwriting of that individual. Group life insurance is written as a master policy, issued to the sponsoring organization, covering the lives of more than one individual member of that group. In group insurance, individual participants typically do not need to provide proof of insurability.

What kind of policy issues certificates of insurance to insureds?

Group insurance-individuals covered by group life insurance do not receive a policy, but receive a certificate of insurance from the master policy

When would a misrepresentation on an insurance application be considered fraud?

If it is intentional and material

What is the purpose of a free look period in insurance policies?

It allows the insured to reject the policy with a full refund.

Which of the following is true regarding the spendthrift clause in life insurance policies?

It can protect the policy proceeds from creditors of the beneficiary.

Which of the following is true about the mandatory free look in a life insurance policy?

It commences when the policy is delivered. (The free look provision is a mandatory provision that allows the insured to examine a policy, and if dissatisfied for any reason, return the policy for a full refund of any premiums paid.)

Why is an equity indexed annuity considered to be a fixed annuity?

It has a guaranteed minimum interest rate.

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

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

An insured buys a 5-year level premium term policy with a face amount of $10,000. The policy also contains renewability and convertibility options. When the insured renews the policy in 5 years, what will happen to the premium?

It will increase because the insured will be 5 years older than when the policy was originally purchased.

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

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy?

Mutual Funds not paid out after paying claims and other operating costs are returned to the policyowners in the form of a dividend. If all funds are paid out, no dividends are paid.

Can a group that is formed for the sole purpose of obtaining group insurance qualify for group coverage?

No, the group must be formed for a purpose other than obtaining group insurance.

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 of the following entities is responsible for agent licensing and administrative supervision?

Office of Insurance Regulation

A participating insurance policy may do which of the following?

Pay dividends to the policyowner

Which of the following is another term for the accumulation period of an annuity?

Pay-in period (The accumulation period is also known as the pay-in period. It is the period of time over which the annuitant makes payments (premiums) into an annuity.)

Which of the following is among the regulations set forth by the Florida replacement rule?

Providing a written comparison and summary statement

Another name for a substandard risk classification is

Rated Substandard risk classification is also referred to as "rated" since these policies could be issued with the premium rated-up, resulting in a higher premium.

Any inducement offered to the insured in the sale of an insurance policy that is not specified in the policy is an unlawful practice known as

Rebating

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- anytime a new policy is issued that replaces or modifies existing insurance, a replacement form must be submitted to the ceding company

A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy

Required a premium increase each renewal.

When an insured under a life insurance policy died, the designated beneficiary received the face amount of the policy, as well as a refund of all the premiums paid. Which rider is attached to the policy?

Return of premium

To sell variable life insurance policies, an agent must receive all of the following EXCEPT

SEC registration

Upon policy delivery, the producer may be required to obtain any of the following EXCEPT

Signed waiver of premium. The policy does not go into effect until the premium has been collected. If the premium was not collected at the time of the application, the producer may also be required to get a Statement of Good Health from the applicant at the time of policy delivery. Waiver of premium is a rider that can be added to a life insurance policy, and not something to be obtained from the applicant.

Which of the following policies would be classified as a traditional level premium contract?

Straight life

Which of the following statements about a suicide clause in a life insurance policy is true?

Suicide is excluded for a specific period of years and covered thereafter.

The advantage of qualified plans to employers is

Tax-deductible contributions

An employer offers group life insurance to its employees for the amount of $10,000. Which of the following is true?

The cost of coverage is a deductible expense by the employer. The cost of coverage paid by the employer in excess of $50,000 is taxed to the employee.

Which of the following dates must be contained in a policy summary?

The date the summary was prepared

Who is the owner and who is the beneficiary on a Key Person Life Insurance Policy?

The employer is the owner and beneficiary. With the key-person coverage, the business (the employer) is the applicant, owner, premium payer, and beneficiary.

Which of the following determines the cash value of a variable life policy?

The performance of the policy portfolio. The cash value of a variable life policy is not guaranteed and fluctuates with the performance of the portfolio in which the premiums have been invested by the insurer.

If an insured continually uses the automatic premium loan option to pay the policy premium,

The policy will terminate when the cash value is reduced to nothing

A person insured under a group life insurance policy can make an assignment of all or any part of the incidents of ownership conferred on the insured by the policy or by law, to any of the following EXCEPT

The policyholder. Any person insured under a group life insurance policy can make to any person, other than the policyholder, an assignment of all or any part of the incidents of ownership conferred on the insured by the policy or by law, including the right to exercise the conversion privilege and the right to name a beneficiary.

The paid up addition option uses the dividend

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

Which type of life insurance policy allows the policyowner to pay more or less than the planned premium

Universal Life

All of the following are true regarding the convertibility option under a term life insurance policy except

Upon conversion, the death benefit of the permanent policy will be reduced by 50%

Which of the following types of policies allows for a flexible premium and a variable investment component?

Variable universal life insurance

When an insurer begins underwriting procedures for an applicant, what will be the main source for its underwriting information?

application

Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT

conditions

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?

consideration

Variable Life Insurance

contracts in which the cash values accumulate based upon a specific portfolio of stocks without guarantees of performance

Universal life insurance policy

incorporates flexible premiums and an adjustable death benefit. The investment gains from a Universal Life Policy usually go toward the cash value. The policyowner can use the cash value to manipulate the flexible aspects of a universal life insurance policy. A customer who wants a policy that gives them the most options and the most control would be looking for a Universal Life Policy. Universal policies use gains to fund the cash value and give the policyowner options for flexible premiums and adjustable death benefits.

All advertisements are the responsibility of the

insurer

If an insurer requires a medical examination of an applicant in connection with the application for life insurance, who is responsible for paying the cost of the examination?

insurer

Insurance contracts are agreements between which two parties?

insurer and policyowner

Authorized Insurer

insurer who has received a Certificate of Authority from the department of insurance to transact insurance in this state

Which of the following terms means a result of calculation based on the average number of months the insured is projected to live due to medical history and mortality factors?

life expectancy

Which of the following riders added to a life insurance policy can pay part of the death benefit to the insured to cover expenses incurred in a nursing or convalescent home?

long term care

Medical Information Bureau (MIB)

non-profit central information agency that was established by a number of insurance companies to aid in underwriting. Speeds up underwriting and helps prevent fraud.

Accelerated Benefits Provision

provide for the early payment of some portion of the policy's face amount should the insured suffer from a terminal illness or injury.(up to 75%)

When a life insurance policy stipulates that the beneficiary will receive payments in specified installments or for a specified number of years, what provision prevents the beneficiary from changing or borrowing from the planned installments

spendthrift provision When a life insurance policy contains a spendthrift provision, all rights of the beneficiary to change time of payment or amount of installments, surrender cash, borrow against, or assign for any purpose, are withdrawn and those parts of the policy that may give the beneficiary such rights are void.