Practice test

Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report

Must be informed of the source of the report.

Which of the following documents must be provided to the policyowner or applicant during policy replacement?

Notice Regarding Replacement

The paid-up addition option uses the dividend

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

Under what circumstances can an agent's appointment be transferred to another person?

Under no circumstances

What is the other term for the cash payment settlement option?

Lump sum

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

In the state of Florida, it is illegal for a licensee's commissions from controlled business to exceed what percentage of the total in a given year?

50%

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

Regulations for annuity recommendations would apply when a consumer is at least what age?

65 years old

all of the following are examples of third party ownership of a life insurance policy EXCEPT

An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan.

An insurance contract must contain all of the following to be considered legally binding EXCEPT

Beneficiary's consent

To legally transact insurance in this state, an insurer must obtain which of the following?

Certificate of Authority

Which of the following must an insurer obtain in order to transact insurance within a given state?

Certificate of authority

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

Commingling.

Which of the following authorities grants and revokes licenses?

Department of Financial Services

Which of the following will NOT be considered unfair discrimination by insurers?

Discriminating in benefits and coverages based on the insured's habits and lifestyle

A return of premium life insurance policy is written as what type of term coverage?

Increasing

Which provision of a life insurance policy states the insure's duty to pay benefits upon the death of the insured, and to whom the benefits will be paid?

Insuring Clause

Which of the following is true of a children's rider added to an insured's permanent life insurance policy?

It is TERM coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age.

If a retirement plan or annuity is "qualified," this means

It is approved by the IRS.

What is the purpose of a conditional receipt?

It is intended to provided coverage on a date prior to the policy issue.

twin brothers are starting a new business. they know it will take years to build the business to the point that they can pay off debt incurred in starting the business. what type of insurance would be the most affordable and still provide a death benefit should one of them die?

Joint life

Variable whole life insurance is based on what type of premium?

Level fixed

Which of the following would help prevent a universal life policy from lapsing?

Target Premium

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

The Office of Insurance Regulation

An insured under a life insurance policy has been diagnosed with a terminal illness and has 6 months to live. The insured knows that his financial state will worsen even more with the upcoming medical expenses. What option could the insured utilize?

Viatical settlement

Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?

premiums aren't tax deductible as a business expense

If a life policy owner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a

guaranteed insurability rider

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

which of the following is the best reason to purchase life insurance rather than annuities ?

to create an estate

When would a 20-pay whole life policy endow?

when the insured reaches age 100

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

What percentage of a company's employees must take part in a noncontributory group life plan?

100%

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

Which of the following reports will provide the underwriter with the information about an insurance applicant's credit ?

Consumer Report

Contracts that are prepared by one party and submitted to the other party on a "take it or leave it" basis are classified as

Contracts of adhesion.

According to the entire contract provision, what document must be made part of the insurance policy?

Copy of the original application

An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy?

Guaranteed insurability option

A father purchases a life insurance policy on his teenage daughter and adds the Payor Benefit rider. In which of the following scenarios will the rider waive the payment of premium?

If the father is disabled for more than 6 months

In which of the following cases will the insured be able to receive the full face amount from a whole life policy?

If the insured lives to age 100

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

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.

What is a definition of a unilateral contract?

One-sided; only one party makes an enforceable promise

What is the major difference between a stock company and a mutual company?

Ownership

A participating insurance policy may do which of the following?

Pay dividends to the policyowner

What describes the specific information about a policy?

Policy Summary

If the policy owner, the insured and the beneficiary under a life insurance policy are three different people, who had the ownership rights?

Policy owner

Who might receive dividends from a mutual insurer?

Policyholders

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

The policy owner pays for her life insurance annually. Until now, she has collected a non taxable 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

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

Single Premium Whole Life

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

How will a life insurance beneficiary designation naming a spouse be changed by divorce?

The beneficiary designation will be voided.

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 to a medical exam. If the policy is issued, what would be the policy's effective date?

The date of medical exam

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.

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.

All of the following are TRUE statements regarding the accumulation at interest option EXCEPT

The interest credited under this option is not taxable since it remains inside the insurance policy.

What is the advantage of reinstating a policy instead of applying for a new one?

The original age is used for premium determination

In terms of parties to a contract, which of the following does NOT describe a competent party?

The person must have at least completed secondary education.

If a life insurer holds the proceeds of any policy it issues, which of the following is true?

The proceeds may be exempt from any creditor's claims against a beneficiary other than the policy owner.

Which is true about a spouse term rider?

The rider is usually level term insurance expires at age 65

Which of the following is NOT true of life settlements?

The seller must be terminally ill.

Which of the following insurance products will be subject to the regulation on life insurance solicitation?

A term life policy

All other factors being equal, the least expensive first-year premium payment is found in

Annually renewable term

Which of the following best describes an insurance company that has been formed under the laws of this state?

Domestic

If a change needs to be made to the application for insurance, the agent may do all of the following except ?

Erase the incorrect answer & record the correct answer.e

The requirement that agents not commingle insurance monies with their own funds is known as

Fiduciary responsibility.

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

Which of the following activities would be sufficient violation to warrant rejection, revocation, or suspension of an insurance agent's license?

Forgery

A married couple owns a permanent policy which covers both of their lives and pays the face amount of the policy only upon the death of the first. Which policy is that?

Joint Life Policy

Which of the following settlement options in life insurance is know as straight life?

Life Income

an applicant who receives a preferred risk classification qualifies for

Lower premiums than a person who receives standard risk

When replacing life insurance, the duties of the replacing insurance company include all of the following EXCEPT

Maintaining a copy of the Notice Regarding Replacement and all sales proposals used for at least 5 years.

Which is the appropriate action by the insurer if a prospective insured submitted an incomplete application?

Return the application to the applicant for completion

The insurer discovered that on of the applicants for life insurance missed a couple of questions on the application. What should the insurer do with the application?

Return to the applicant for completion

The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called?

Waiver of premium.

Which of the following types of insurance policies would perform the function of cash accumulation?

Whole life

Which of the following types of policies will provide permanent protection? Whole Life

Whole life

An agent delivers a life insurance policy to the proposed insured. The insured makes a decision not to accept the policy. The insured may return the policy for a full refund of premium within how many days?

14

Which of the following is NOT true regarding the accumulation period of an annuity?

It would not occur in a deferred annuity.

An insured purchased a life policy in 2010 and died in 2017. the insurance company discovers at that time that the insured had concealed information during the application process. What can they do ?

pay the death benefit

To sell variable life insurance policies an agent must receive all of the following except:

SEC Registration

In life policies issued in this state, insurers are permitted to charge interest during the policy grace period for the number of days elapsing before the premium is paid. What is the maximum annual interest rate?

8%