Primerica exam 2

The sole beneficiary of a life insurance policy dies before the insured. If the policyowner fails to change the beneficiary before the insured's death, the proceeds of the policy will go to

The insured's estate.

What is the purpose of a fixed-period settlement option?

To provide a guaranteed income for a certain amount of time

Peril is most easily defined as

The cause of loss insured against

All of the following are requirements for life insurance illustrations EXCEPT

They must be part of the contract.

How many hours of continuing education must agents complete each licensing term?

24

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

In general terms, IRA contributions

Are tax deductible. Individuals who are not covered by an employer-sponsored plan may deduct the full amount of their IRA contributions regardless of their income level.

Which of the following statements regarding Business Overhead Expense policies is NOT true?

Benefits are usually limited to six months.

A rider that may be attached to a life insurance policy that will adjust the face amount based upon a specific index, such as the Consumer Price Index, is called

Cost of living rider.

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

Intentionally misrepresenting or concealing a material fact to induce an insurance company to make a contract is known as

Fraud.

The automatic premium loan provision is activated at the end of the

Grace period. Provided there is sufficient cash value in the policy, this provision triggers a loan at the end of the grace period to keep a policy in force.

Which of the following best defines earned surplus?

Insurer's unassigned funds.

Which of the following is correct regarding credit life insurance?

It insures the life of a debtor. Credit life insurance is a special type of coverage written to insure the life of the debtor and pay off the balance of a loan in the event of the death of the debtor.

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

Life income

Which of the following will be included in a policy summary?

Premium amounts and surrender values A policy summary must be delivered along with the policy and will provide the producer's name and address, the insurance company's home office address, the generic name of the policy issued, and premium, cash value, surrender value and death benefit figures for specific policy years.

The California Insurance Code is

Statutes written and passed by the California legislature and signed into law by the governor. The State laws that govern the business of insurance in the State.

All of the following entities regulate variable life policies EXCEPT

The Guaranty Association. Variable life insurance is regulated by both the state and federal government, as well as the Insurance Department, and the SEC.

Which of the following information will be stated in the consideration clause of a life insurance policy?

The amount of premium payment

Which of the following is TRUE regarding variable annuities?

The annuitant assumes the risks on investment. The payments that the annuitant invests into the variable annuity are invested in the insurer's separate account. The separate account under many annuities provides the annuitant with a dozen or more investment options ranging from "money market funds" to "growth stock funds" to "precious metal funds". Therefore, the annuitant assumes the risk of the investment.

Obtaining information under false pretenses is a violation. What would be the maximum fine for any agent found guilty?

$10,000 The maximum dollar amount fined for obtaining information under false pretenses is $10,000. (CIC 791.22)

What is the waiting period on a Waiver of Premium rider in life insurance policies?

6 months Most insurers impose a 6-month waiting period from the time of disability until the first premium is waived.

Which of the following would NOT be considered a form of direct response marketing?

A sign in an insurer's office

Joe, Larry, and Curly own a small business. They have made a legal arrangement which states that if one of them dies or becomes disabled, the other two will be able to buy the partner's shares. Which term best describes this arrangement?

Business Continuation In a Business Continuation arrangement, the partners of a business can buy shares belonging to a recently deceased or disabled partner.

A small hardware store owner is involved in a car accident that renders him totally disabled for half a year. Which type of insurance would help him pay for expenses of the company during the time of his disability?

Business overhead expense policy

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 and record the correct answer. An agent should not use white-out, erase or obliterate any answers given to a question on an application. It could prevent an insurer from contesting the application, should it be necessary.

What do individuals use to transfer their risk of loss to a larger group?

Insurance Insurance is the mechanism whereby an insured is protected against loss by a specified future contingency or peril in return for the present payment of premium. Because many other individuals with the same or similar risk of loss are paying premiums, funds are available to indemnify those who actually suffer that loss.

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

It would not occur in a deferred annuity.

A set of legal or regulatory conditions that affect an insurer's ability to collect premiums commensurate with the level of risk incurred would be considered a(n):

Legal hazard. Legal hazard is defined as a set of legal or regulatory conditions that affect an insurer's ability to collect premiums commensurate with the level of risk incurred.

Regarding the taxation of Business Overhead policies,

Premiums are deductible, and benefits are taxed

What method is used to determine the taxable portion of each annuity payment?

The exclusion ratio The ratio of the total investment in that contract to the expected return is developed to determine the portion of the annuity payment that will be taxable and nontaxable.

In a survivorship life policy, when does the insurer pay the death benefit?

Upon the last death Survivorship life pays on the last death rather than upon the first death.

Insurance is the transfer of

risk

When a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income?

Interest only

Concerning Juvenile Life insurance, which of the following statements is INCORRECT?

Juvenile Life is classified as any life insurance purchased by a minor.

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

Which of the following statements is INCORRECT concerning an IRA?

Married individuals must contribute into one account for both spouses, up to a specified amount for each person.

An individual's tendency to be dishonest would be indicative of a

Moral hazard.

A key person insurance policy can pay for which of the following?

Costs of training a replacement

Which of the following is a TRUE statement concerning an insurer's Earned Surplus?

Earned Surplus are unassigned funds that are required to be reported on the insurer's annual statement.

If a life insurance policy increases significantly in face amount (death benefit) when the insured reaches a specified age, what type of policy is this?

Jumping juvenile policy