Primerica Life & Health Insurance (multiple choice mostly)
According to the Law of Agency, a principal is represented by a/an:
Agent-a person who acts for another person or entity known as the principal with regard to contractual arrangements with third parties
a
An insured receives an annual life insurance dividend check. What term best describes this arrangement? a. Cash option b. accumulation at interest
In forming an insurance contract, when does acceptance usually occur? a) When an insurer accepts an application b) When an insurer approves a prepaid application c) When an insured receives the policy d) When an insurer receives an application
Answer: B
What does "leve" refer to in level term insurance? a) Cash value b) Interest rate c) Face amount d) Premium
Answer: C
Which of the below statements is FALSE concerning a Modified Endowment Contract (MEC)? a) Policy loans are taxable distributions b) MECs lose some of the favorable tax treatment of distributions c) The policyholder can receive distributions at any time without being penalized d) Distributions before age 59 ½ have a penalty tax of 10% on the gain in the policy
Answer: C
Which of the following is true regarding health insurance? a) It provides death benefit coverage b) It only covers expenses related to health care c) It could provide payments for loss of income d) Disability coverage is excluded
Answer: C
b
In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT a.The amount of insurance. b. The type of investment.
All of the following statement concerning the use of life insurance as an Executive Bonus are correct EXCEPT a) The policy is owned by the company b) Any type of insurance policy may be used c) The employer pays a bonus to a selected employee to fund the policy d) It is considered a nonqualified employee benefit
Answer: A
A state-issued document empowering an insurance company to become an admitted insurer is called what?
Certificate of authority
which type of insurance is based on mutual agreements among subscribers?
reciprocal insurance
C. Limited pay policy
the policy owner of an adjustable life policy can increase premium payments and have which of the following? A. a higher cash value interest rate B. a higher face amount without proof of insurability C. Limited pay policy D. a lower nonforfeiture
What is a primary difference between an IRA and an SEP? a) Only $40,000 maximum per year can be contributed to an IRA b) Much more money can be contributed to an IRA c) Much more money can be contributed to an SEP d) Only $3000 maximum per year can be contributed to a SEP
Answer: C
Which option provides a single beneficiary with income for the rest of his/her life? a. joint life option b. single beneficiary option c. single life option d. one beneficiary option
c. single life option- provides a single beneficiary with income for the rest of his/her life
Liquidation
selling assets as a method of raising capital
what is the major difference between a stock company and a mutual company?
the ownership-mutual companies are owned by policyholders, while stock companies are owned by stockholders
The term 'fixed' in a fixed annuity refers to all of the following except a) Death benefit b) Guaranteed rate of interest c) Equal annuity payments d) Amount and length of payments
Answer: A
b
How is emergency care covered for a member of an HMO? a. A member of an HMO may receive care at any emergency facility, at the same cost as if in his/her own service area. b. A member of an HMO can receive care in or out of the HMO service area, but care is preferred in the service area.
what entities make up the Medical Information Bureau?
Insurers
If a consumer requests additional information concerning an Investigative Consumer Report, how long does the insurer or reporting agency have to comply? a. 5 days b. 7 days c. 10 days d. 3 days
a. 5 days
Which of the following provisions must be included on the first page of a Medicare supplement policy, which states the insurer's right to change premium amounts? a) Coverage Limitations b) Continuation Provision c) Premium Provision d) Insurer's Rights
b) Continuation Provision The Renewal Provision, also known as a "Continuation Provision", must be included on the first page of Medicare supplement policies. This provision explains the right of the insurer to alter premium amounts.
To be eligible to convert a group policy to an individual policy, a person must have been covered by the group policy for at least a) 12 months b) 3 months. c) 6 months. d) 9 months.
b) 3 months. A person must have been insured under the group policy for at least 3 months at the point when coverage ends to be allowed to convert it to an individual policy.
Who has the legal title of the property in a trust? a. guardian b. trustee c. grantor d. beneficiary
b. trustee
social security was created to protect against all of the following EXCEPT 1. sickness in old age 2. premature death 3. disability 4. bad investment choices
bad investment choices
which of the following policy components contains the company's promise to pay? 1. premium mode 2. consideration clause 3. entire contract provision 4. insuring clause
insuring clause
The purchase of life insurance creates an immediate _______
estate- an estate can be created through earnings, savings, and investments, but life insurance is the only legal method by which an immediate estate can be created at such a small cost
what type of insurance would be used for return of premium rider? 1. level term 2. decreasing term 3. annually renewable term 4. increasing term
increasing term
All of the following factors, which are identified on the application, play a vital role in determining the insured's insurability EXCEPT: a) Education b) Age c) Gender d) Occupation
Answer: A
All of the following individuals may qualify for Medicare health insurance benefits EXCEPT: a) A person age 50 b) A person 65 or older c) A person age 53 who suffers from chronic kidney disease d) A person under age 65 who is receiving social security disability benefits
Answer: A
All other factors being equal, which of the following premium payment modes will incur the lowest overall payment? a) Annual b) Semi-annual c) Quarterly d) Monthly
Answer: A
In order to qualify for conversion from a group life policy to an individual life policy of the same coverage, a person must have been insured under the group plan for how many years? a) 5 b) 10 c) 1 d) 3
Answer: A
who is a third-party owner? 1. an insurer who issues a policy for two people 2. an employee in a group policy 3. an irrevocable beneficiary 4. a policyowner who is not the insured
a policyowner who is not the insured
for the purpose of insurance, risk is defined as:
the uncertainty or chance of loss
in order to quality for conversion from a group life policy to an individual policy of the same coverage, a person must have been insured under the group plan for how many years? 1. 1 2. 3 3. 5 4. 10
5
a
An employee quits his job on May 15 and doesn't convert his Groupe 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? a. insurer will pay the full death benefit to the beneficiary b. insurer will pay a reduced death benefit to the beneficiary
b
An insured submitted a notice of claim to the insurer, but never received claims forms. He later submits proof of loss, and explains the nature and extent of loss in a hand-written letter to the insurer. Which of the following would be true? a. The insured must submit proof of loss to the Department of Insurance. b.The insured was in compliance with the policy requirements regarding claims.
a
Evaluating information that establishes adverse selection risk is the purpose of which stage of insurance? a. underwriting b. application
When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option?
Fixed amount settlement
b
The paid-up addition option uses the dividend a. To reduce the next year's premium. b. To purchase a smaller amount of the same type of insurance as the original policy.
What amount can co-insurance not exceed in New York's major medical plans? a) 25% b) 35% c) 40% d) 50%
a) 25% In the state of New York, co-insurance cannot exceed 25% for major medical plans.
b
an underwriter is reviewing the medical questions in the application and needs further information due to a medical situation the applicant had in the past. What will the underwriter require? a. statement of continured good health b. attending physician statement
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 1. policyowner 2. insurance company 3. contingent beneficiary 4. insured's spouse
contingent beneficiary
what is the official name for the social security program? 1. old age survivors disability insurance 2. social insurance program 3. defined benefit retirement insurance 4. qualified pension plan
old age survivors disability insurance
a rider attached to a life insurance policy that provides coverage on the insured's family members is called the 1. juvenile rider 2. payor rider 3. other-insured rider 4. change of insured rider
other-insured rider
What is the term for the causes of loss insured against in a insurance policy?
peril
who can request changes in premium payments, face value, loans, and policy plans? 1. producer 2. policyowner 3. contingent beneficiary 4. beneficiary
policyowner
insured
the person on whose life an insurance policy is written
an internal revenue code provision that specifically provides for an individual retirement plan for public school teachers is a(n) 1. 403(b) plan (TSA) 2. keogh plan 3. roth IRA 4. sep
403(b) plan (TSA)
A person who does not lock the doors to his/her house show an indifferent attitude. This person presents what type of hazard?
Morale
What is the term that most accurately describes the provision designed to relieve life insurance premium payment for minors whose parents have died or become disabled? a. Waiver of Premium b. Payor Benefit c. Jumping Juvenile d. Juvenile Premium Provision
b. Payor Benefit- if the guardian of a child dies or becomes disabled, the child will be exempt from the premium payment until a certain age, usually 21
Which of the following factors would be an underwriting consideration for a small employer carrier? a) Health status b) Medical history of the employees c) Percentage of participation d) Claims experience
c) Percentage of participation Coverage under a small employer health benefit plan is generally available only if at least 75% of eligible employees elect to be covered.
Which of the following statements is correct about a standard risk classification in the same age group and with similar lifestyles? a. standard risk pays a higher premium than a substandard risk b. standard risk requires extra rating c. standard risk is also known as high exposure risk d. standard risk is representative of the majority of people
d. standard risk is representative of the majority of people-average risk
which of the following is NOT an example of a business use of life insurance? 1. buy-sell funding 2. executive bonuses 3. key person 4. worker's compensation
worker's compensation
What provision may allow a small employer health benefit plan to exclude coverage for a pregnancy existing on the effective date of the coverage? a) Adverse selection b) Open enrollment c) Pre-existing condition d) Specified disease coverage
Answer: C
Which of the following is NOT a characteristic of an insurable risk? a) The loss must be measurable b) The loss exposure must be large c) The loss must be catastrophic d) The loss must be due to chance
Answer: C
An insurance company receives an application with some information missing and issues the policy anyway. What is this called? a) Estoppel b) Subrogation c) Aleatory d) Waiver
Answer: D
Which of the following is not correct regarding false statements by person engaged in the business insurance? a) Omissions of material fact on insurance application are fraud b) Full statement about financial condition of an insurer are unlawful c) Statements made with the intent to deceive or unlawful d) Only written statements can be considered fraud
Answer: D
Joe did not remember to renew his insurance license before the due date. What must he do now to reinstate the license without having to take a written exam? a) Pay 3 times the renewal fee within 24 days of the due date b) Pay double the amount of the unpaid renewal fee within 24 months of the due date c) Pay the usual renewal fee within 24 months of the due date d) Joe cannot reinstate his license now without passing a written exam
Answer: B
b
Which of the following would be least likely to be considered a legitimate need that would be paid by insurance proceeds? a.Debt cancellation b. vacation travel expenses
D. 15 days
if 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
B. ownership mutual company are owned by policyholders while stock companies are owned by stockholders
what is the major difference between a stock company and a mutual company? A. Types of ppolicies B. Ownership C. Amnt. Of death benefit D. Number of producers
a
where would the underwriter find relevant info not presented by the applicant but communicated by the producer? a. application b. policy summary
C. warranty a warranty for insurance is a statement guaranteed to be true. When an applicant is applying for an insurance contract the statements he or she makes are generally not warranties but representations.
which of the following is a statement that is guaranteed to be true and if untrue May breach insurance contract
the rider in a whole life policy allows the company to forgo collecting the premium if the insured is disabled is called 1. waiver of premium 2. guaranteed insurability 3. waiver of cost of insurance 4. payor benefit
waiver of premium
A. Option B
which option for universal life allows the beneficiary to collect both the death benefit and cash value apon the death of the insured? A. option B B. Corridor option C. Variable option D. Option A
to attain currently insured status under social security, an worker must have earned at least how many credits during the last 13 quarters? 1. 4 credits 2. 6 credits 3. 10 credits 4. 40 credits
6 credits
According to the Future Increase Option Rider (FIO) which of the following is NOT an acceptable time to increase an insured's benefit level? a) Death of spouse b) Age 34 c) Marriage d) Birth of a child
Answer: A
What process will the insurance company use to monitor the insured's hospital stay to make sure the everything is proceeding according to schedule? a) Precertification review b) Concurrent review c) Prospective review d) Corridor review
Answer: B
Which document helps to insure full and fair disclosure to the recipient of a policy? a) Statute of limitations b) Outline of coverage c) Benefit limitations d) Policy summary
Answer: B
The 2 types of assignments are a) Complete and partial b) Complete and proportionate c) Absolute and collateral d) Absolute and partial
Answer: C
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
A Medicare supplement policy must provide coverage for pre-existing conditions after the policy has been in force for: a) 2 years b) 90 days c) 6 months d) 1 year
Answer: C
a
The death protection component of Universal Life Insurance is always a. annually renewable term b. whole life
a
Under the Accidental Death and Dismemberment (AD&D) coverage, what type of benefit will be paid to the beneficiary in the event of the insured's accidental death? a. principal sum b. capital sum
b
Which of the following is NOT true regarding the Needs Approach method of determining the value of an individual's life? a. Coverage is based on the predicted needs of that family b. Need is predicted using the number of years until the insured's retirement.
most common use of life insurance by businesses is:
an employee benefit-serves a a protection for employees and their beneficiaries
If an applicant for a lief insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about a. which individual will pay the premium b. whether an insurable interest exists between the individuals c. the gender of the applicant d. the type of policy requested
b. whether an insurable interest exists between the individuals
Which of the following is NOT a type of information that needs to be gathered in order to determine the value of someone's life when using the needs approach? a. mortgages b. expenses c. estimated longevity d. outstanding debt
c. estimated longevity
which of the following is the required number of participants in a contributor group plan? 1. 75% 2. 100% 3. 25% 4. 50%
75%
Which of the following is an example of a limited-pay life policy? a) Life paid up at Age 65 b) Renewable Term to Age 70 c) Level term life d) Straight life
Answer: A
Combination plans are comprised of 2 types of plan features: basic and a) Expanded b) Limited c) Comprehensive d) Scheduled
Answer: C
an insurance company is domicled in Califrnia and transacts insurance in Nevada. What is this insurer's classification in Nevada?
Foreign
When the policyowner specified a dollar amount in which installments are to be paid; he/she has chosen a settlement upon a) Extended term b) Fixed amount c) Fixed period d) Life income period certain
Answer: B
The renewal commissions paid in the 3rd year must be as high as the commission of which year? a) 3rd b) 4th c) 1st d) 2nd
Answer: D
A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision? a. assignment b. automatic premium loans c. waiver of premium d. incontestability period
b. automatic premium loans- commonly added to contracts with a cash value at no additional charge. This is a special type of loan that prevents the unintentional lapse of a policy due to nonpayment of the premium
An investor buys a life policy on an elderly person in order to sell it for a life settlement. This is an example of:
a STOLI policy
buy-sell agreement
a legal contract that determines what will be done with a business in the event that an owner dies or becomes disabled (business continuation agreement)
b
an insured's disability income policy includes an additional monthly benefit rider. For how many years can the insured expect to receive payment from the insurer before Social Securty benefits begin? a. 3 years b. 1 year
what is the term for how frequently a policyowner is required to pay the policy premium? 1. schedule 2. grace period 3. consideration 4. mode
mode
which of the following is an example of an agent's fiduciary responsibilities?
promptly forwarding premiums to the insurance company-fiduciary refers to a position of trust, they are acting in a fiduciary capacity when handling the premiums
What benefits are paid directly to the insured under a health insurance policy, the policy provides benefits on what type of basis? a) Reimbursement b) Service c) Limited d) Scheduled
Answer: A
All of the following are regulated areas of the insurance industry EXCEPT a) Investments b) Commissions c) Producers d) Trade practices
Answer: B
b
Tradition IRA owners must begin to withdraw funds a. By December 31 following the year in which they reach 59 ½. b. By April 1 following the year in which they reach 70 ½
a
What company produces evaluations of insurer financial status often used by the Insurance Department? a. AM Best b. NAIC
b
What is the difference between the Medicare approved amount for a service or supply and the actual charge? a. coinsurance b. excess charge
a
Who is responsible for making sure that agents are properly trained in the use of the suitability standards for LTC policies? a. insurer b. commissioner
which of the following is NOT an essential element of an insurance contract? a. counteroffer b. consideration c. agreement d. legal purpose
a. counteroffer- is not required for a contract to be legally binding 4 essential elements are agreement and acceptance consideration competent parties legal purpose
Which non forfeiture option has the highest amount of insurance protection? a. extended term b. conversion c. decreasing term d. reduced paid-up
a. extended term
An underwriter is reviewing the medical questions in the application and needs further information due to a medical situation the applicant had in the past. What will the underwriter require? a. statement of continued good health b. attending physician statement c. a complete medical record d. sworn health affidavit from the applicant
b. Attending Physician statement- APS is used to obtain medical details about a specific condition which has shown up in the application; the insurance company orders the information directly form the physician, using a signed authorization which was part of the application
Rod wants to pay his initial life insurance premium in advance. Which of the following best describes his situation? a. Rod cannot pay his policy is advance; it is payable either when the agent delivers the policy or anytime during the first initial month b. Rod can pay his premium as early as he wants, even with his application c. Rod can pay his premium only after the policy has been issued, regardless of its delivery status d. Rod cannot pay his policy in advance; it is payable only when the agent delivers the policy
b. Rod can pay his premium as early as he wants, even with his application-which is stipulated by the Payment of Premium Clause
which of the following is TRUE concerning irrevocable beneficiaries? 1. can be changed only with the written consent of that beneficiary 2. may be changed at any time 3. can never be changed 4. may be changed only on the anniversary date of the policy
can be changed only with the consent of that beneficiary
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 adminstrator to another and what is the tax consequence of a direct transfer? 1. $8000, no tax consequence 2. $8000, tax on growth only 3. $10,000, tax on growth only 4. $10,000, no tax consequences
$10,000, no tax consequences
What is the major difference between a Stock Redemption Plan and a Cross Purchase Plan?
In a Stock Redemption Plan, the policies are owned by an entity, and in a Cross Purchase Plan, the policies are owned by individuals- If the business owns the policies, pays the premiums, and is the beneficiary, the agreement is called Stock Redemption Plan. If the policies are owned by individual business partners who pay the premiums and are the beneficiaries, the plan is called a Cross Purchase Plan
a
In reference to the standard Medicare Supplement benefits plans, what does the term "standard" mean? a. All providers will have the same coverage options and conditions for each plan. b. All plans must include basic benefits A - L.
Partner A in a business buys a life insurance policy on Partner B to protect herself against a financial loss if he should die. Two years after the partnership is dissolved Partner B dies. Who will receive the death benefit?
Partner A
a
Which clause allows both the insured and dentist to know in advance which benefits will be paid? a. precertification b. preadmission
what is the most common way to transfer risk?
purchase insurance- the transfer of loss is borne by another party
A situation in which a person can only experience a loss and no gain presents what type of risk?
pure risk
what type of risk is insurable?
pure risk
D. it provides income the beneficiary cannot outlive the single life option provides a single beneficiary income for the rest of his or her life upon the death of the beneficiary the payments stop
which of the following is true regarding a single life settlement option? A. payments continue until the entire principal is exhausted B. proceeds are paid out in a lump sum C. it provides income for Pa specific Period of time D. it provides income the beneficiary cannot outlive
C. Universal Life option A universal life aoption A (level death benefit option) policy must maintain a specified "corridor" or gap between the cash value and the death benefit, as required by the IRS. If this corridor is not maintained, the policy is no longer defined as life insurance for tax purposes, and consequently loses most of the tax advantages that have been associated with life insurance.
which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit. A. Equity Indexed Universal Life B. Variable Universal Life C. Universial life option A D. Universial Life Option B
The most the insurance guaranty Association will pay for net cash surrender values is: a) 500,000 b) 1,000,000 c) 100,000 d) 250,000
Answer: C The insurance guarantee association will not pay more than 100,000 for net cash surrender and net cash withdrawal values.
Which of the following is NOT true regarding Equity Indexed Annuities a) The insurance company keeps a percentage of the returns b) They have guaranteed minimum interest rates c) They are less risky than variable annuities d) They earn lower interest rates than fixed annuities
Answer: D
A policy with a 31-day grace period implies a) The policy continues for 31 days if premiums are not paid b) The policy holder has a 31 day free look c) The policy lapses if premium is not paid 31 days before it is due d) If something happens within 31 days of the policy issue, the insurer will not pay
Answer: A
b
55 year old Ricki has worked part-time for his new employer for 3 month now but has not been offered health insurance. What facort has limited Ricki's eligibility? a. age b. # of hours that he works per week
what is the waiting period on waiver of premium rider in life insurance policies? 1. 30 days 2. 3 months 3. 5 months 4. 6 months
6 months
a
A Medicare SELECT policy does all of the following EXCEPT a. Prohibit payment for regularly covered services if provided by non-network providers. b. Provide payment for full coverage under the policy for covered services not available through network providers.
a
A man purchased a health policy to provide coverage on himself, his wife, and their two children. All of them would need to prove insurability EXCEPT a.Children born after the inception of the contract. b. The man's children existing at the time of the contract..
What company produces evaluations of insurer financial status often used by the Insurance Department?
AM Best & Company- assigns ratings to life, property and casualty insurance companies based upon the financial stability of the insurer.
b
After the elimination period, a totally disabled insured qualified and started receiving benefits from his disability income policy that has a waiver of premium rider. What will most likely happen to the premiums paid into the policy during the elimination period? a. premiums will be waived b. premiums will be refunded
a
Agent D submitted an application for life insurance on client A. No money was sent with the application. When Agent D attempted to deliver the policy, he discovered that A had suffered a heart attack since the application was taken. The agent should a. return the policy to the insurer b. Mail the policy to the address shown and enclose a statement for the premium.
b
Albert and Bryan are partners in a business. They purchase a Buy-sell agreement, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement? a. permanent insurance b. any form of life insurance
All else being equal which of the following will NOT be considered unfair discrimination by insurers? a) Discriminating in benefits and coverages based on insured's habits and lifestyle b) Charging applicants with similar health histories different premium rates based on their ethnicity c) Cancelling individual coverage based on the insured's marital status d) Assigning different risk classifications to applicants based on ethnicity
Answer: A
An individual buys a flexible premium deferred life annuity with 20 year period certain. What would his beneficiary receive if he died 5 years after beginning the annuity phase? a) Payments for 15 years b) Payments for 20 years c) Payment for life d) Nothing
Answer: A
In an individual long-term care insurance plan, the insured is able to deduct the premiums from taxes. What income taxation will be imposed on the benefits received? a) No tax b) Policy tax c) Federal income tax d) State income tax
Answer: A
When may an insured deduct unreimbursed medical expenses paid under a long term care policy? a) When the expenses exceed a certain percentage of the insured's adjusted gross income b) Only if the insured is age 65 or older c) All LTC expenses are tax deductible d) Only if the insured does not itemize expenses
Answer: A
Which of the following describes the tax advantage of a qualified retirement plan? a) The earnings in the plan accumulate tax deferred b) Distributions prior to age 59 ½ are tax-deductible c) Employer contributions are deductible as a business expense when the employee receives benefits d) Employer contributions are not taxed when paid out to the employee
Answer: A
Which of the following is NOT a feature of a noncancellable policy? a) The insurer may terminate the contract only at renewal for certain conditions b) The premiums cannot be increased beyond the amount stated in the policy c) The gurantee to renew coverage usually applies until the insured reaches certain age d) The insured has the right to renew the policy for the life of the contract
Answer: A
Which of the following statements is correct concerning taxation of long-term care insurance? a) Excessive benefits may be taxable b) Benefits may be taxable as ordinary income c) Premiums may be taxable as income d) Premiums are not deductible in any case
Answer: A
Which of the following terms describes making false statement about the financial condition of any insurer that are intended to injure any person engage in the business of insurance? a) Defamation b) Undercutting c) Twisting d) Slandering
Answer: A
Adverse selection is a concept best described as a) Only offering coverage to good risks b) Risks with higher probability of loss seeking insurance more often than other risks c) Underwriters slanting the odds in favor of the company d) Poor choices of applicants to be covered
Answer: B
All other factors being equal, which of the following premium modes would result in the lowest overall premium a) Monthly b) Annual c) Quarterly d) Semi-Annual
Answer: B
If a beneficiary wanted a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what option would a beneficiary select? a) Fixed income b) Fixed period c) Fixed Time d) Fixed amount
Answer: B
Which of the following factors does an insurer use the most to determine the extent of disability benefits that it will promise in a contract? a) The insured's hobbies b) The insured's income c) The insured's marital status d) The insured's moral history
Answer: B
Which of the following groups would most likely be covered under a blanket accident policy? a) Independent contractors who work for a general contractor b) Students at a public school c) Office workers for a retail business d) Factory workers at the automobile assembly plant
Answer: B
How are funds contributed to a tax-sheltered annuity treated for taxation? a) The contributions are taxed as income for the employee b) The contributions are taxed as income for the employee, but are tax free upon withdrawal c) The contributions are not included as income for the employee. But are taxable upon distribution d) The contributions are never taxed
Answer: C
The benefits received by the business in a Disability Buy-Sell policy are a) Partially taxable b) Fully taxable c) Income tax free d) Tax deductible
Answer: C
a
Controlled business must not exceed what portion of a producer's transactions? a. 25% b. 50%
Which clause allows both the insured and dentist to know in advance which benefits will be paid? a) Advanced Benefit Notification b) Fixed Rate c) Precertification d) Preadmission
Answer: C
An insured has a Social Insurance Supplement rider in her disability income plan. Following a disability, she begins receiving benefit payment from the insurer. She then begins receiving Social Security benefits that are smaller than the SIS benefit payments. At that point, her insurer ends the SIS benefit payments. Which of the following best describes the situation? a) Miscommunication. The proper authorities should be notified in order to end Social Security payment so that the SIS rider will continue to pay b) Although a mistake may have occurred, the insured has no recourse c) This is typical of an SIS rider d) The insured should contact the insurer to confirm her actual Social Security benefit amount. The SIS rider should pay the difference between the rider amount and the actual benefit.
Answer: D
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 the maximum amount of time that an application may be back dated? a) 1 year b) Not allowed c) Varies from insurer to insurer d) 6 months
Answer: D
If an insurer meets the State's financial requirements and is approved to transact business in the state, it is considered to be a) Certified b) Qualified c) Approved d) Authorized
Answer: D
In respect to the consideration clause, which of the following is consideration on the part of the insurer? a) Offering a secondary policy to the applicant b) Offering an unconditional contract c) Explaining policy revisions to the applicant d) Promising to pay in accordance with the contract terms
Answer: D
The following are legitimate uses of insurance in a business setting EXCEPT a) compensating executive b) funding against financial loss caused by the death of a key employee c) funding business continuation agreements d) funding against general company financial loss
Answer: D
Which of the following is NOT a duty of the Commissioner? a) License insurance companies and producers b) Enforce violations of the insurance code c) Regulate insurance rates d) Develop insurance rates
Answer: D
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.
j applied for a life insurance policy one January. the policy was issued January 31. 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 premium paid? 1. February 28th, or 10 days after the time the policy is delivered 2. the time varies from one policy to another 3. it was already to late when j received the policy because the 10-day free-look period has expired 4. anytime, because the agent did not deliver the policy promptly
February 28th, or 10 days after the time the policy is delivered
a
If an insured continually uses the automatic premium loan option to pay the policy premium, a. The policy will terminate when the cash value is reduced to nothing. b. The face amount of the policy will be reduced by the automatic premium loan amount.
Who makes up the Medical Information Bureau?
Insurers
insurance companies may be classified according to the legal form of their ownership. the typeof company organized to return any surplus money to their policyholders is a:
Mutual insurer-mutual companies are owned and controlled by their policyholders. any surplus money is returned to the policy holders as dividends.
Bonnie wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of the ownership Bonnie should have her husband named as the
Revocable beneficiary-she can make changes to the contract, and she would be the policy owner while her husband would receive the death benefit
which insurer is owned by stockholders who have the usual rights of ownership, including the right of voting and incurring profits or losses?
Stock insurance
under which type of receipts will the coverage begin immediately even if the applicant is later found uninsurable?
Unconditional-with the binding receipt (or temporary insurance agreement), coverage begins immediately and continues for a specific length of time or until the policy is issued or declined.
b
Under a Key Person disability income policy, premium payments a. are made by the employee and are tax-free b. are made by the business and are tax-deductible
b
When a group health insurance plan is terminated, how long is an extension of benefits provided for any totally disabled employee or dependent? a. 3 months b. 12 months
a insurer that has not applied, or has applied and has been denied a Certificate of Authority and may not transact insurance is known as which type of insurer?
a non admitted or unauthorized insurer
D.non participating policy In a nonparticipating the policy pays dividends not to policy owner as with (mutual insurers) but to stockholders (stock insurers)
a policy that does not pay dividends to policy owner is a? A. participating policy B. whole life policy C. mutual life policy D. not participating policy
D. the spouse of a retiring insurance producer
a temporary producer license could be issued without examination to all the following EXCEPT? A. the spouse or legal representative of a deceased insurance producer B. the designee of a licensened insurance producer who enters active duty in the US Armed Forces C. the employee of a disabled licensed a producer D.the spouse of a retiring insurance producer
Which of the following individuals must have insurable interest in the insured? a. producer b. policy owner c. beneficiary d. actuary
b. policy owner-the policy owner must have an insurable interest in the insured, i.e. his/her own life if the policy owner and the insured is the same person, or in the life of a family member or a business partner.
The purpose of managed care health insurance plans is to a) Control health insurance claims expenses. b) Provide for the continuation of coverage when an employee leaves the plan. c) Provide access to the largest number of physicians as possible. d) Coordinate benefits.
a) Control health insurance claims expenses. Managed care is a system of delivering health care and health care services, characterized by arrangements with selected providers, programs of ongoing quality control and utilization review and financial incentives for members to use providers and procedures covered by the plan.
Who can provide skilled nursing care? a) Doctor b) Spouse c) Family Member d) Community volunteer
a) Doctor Skilled nursing care is daily nursing and rehabilitative care that can only be provided by medical personnel, under the direction of a physician. Skilled care is almost always provided in an institutional setting.
Which of the following is NOT among the goals of a Medicare Supplement application? a) Presuming the applicant is eligible for Medicaid, based on the nature of the policy b) Determining whether or not an applicant has an existing Medicare Supplement policy c) Determining whether or not the policy will replace another accident and health policy d) Advising applicants regarding the availability of counseling services
a) Presuming the applicant is eligible for Medicaid, based on the nature of the policy Medicare Supplement policies must ask the applicant if they are eligible for Medicaid.
If a life insurance policy has an irrevocable beneficiary designation, a) The beneficiary can only be changed with written permission of the beneficiary. b) The beneficiary cannot be changed for at least 2 years. c) The owner can always change the beneficiary at will. d) The beneficiary cannot be changed.
a) The beneficiary can only be changed with written permission of the beneficiary. If a policy has an irrevocable beneficiary designation the beneficiary can only be changed with written permission of the beneficiary.
All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT: a. the policy is owned by the company b. any type of insurance policy may be used c. the employer pays a bonus to a selected employee to fund the policy d. it is considered a nonqualified employee benefit
a. the policy is owned by the company-the policy is actually owned by the employee
Which of the following is NOT true of life settlements? a. the seller must be terminally ill b. they could be used for a key person coverage c. they could be sold for an amount grater than the current cash value d. they involve insurance policies with large face amounts
a. the seller must be terminally ill-With Life Settlements, unlike with viatical settlements, the seller does not need to be terminally ill. They usually involve life insurance policies with a face amount of $250,000 or more, "key-person" coverage, corporated owned policies, or policies representing excess coverage that is no longer needed, and could be sold for an amount greater than the current cash value.
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? a. variable b. term c. securities d. stock
a. variable- life policies vary in value, as the name suggests, because the value is based on the stocks that support the policy. If a policyholder wants a more stable, reliable value, he/she should invest in a fixed policy.
The rider that allows the company to forgo collecting the premium if the insured is disabled is called a. waiver of premium b. guaranteed insurability c. waiver of cost of insurance d. payor benefit
a. waiver of premium-rider allows waives the premium if the premium if the insured owner has been totally disabled for a predetermined period. The payor benefit provides for an owner other than the insured and the waiver of cost of insurance is found in Universal Life
an insured misstates her age at the time the life insurance application is taken. this misstatement may result in 1. automatic lapse 2. recession of the policy 3. adjustment in the amount of death benefit 4. no change whatsoever
adjustment in the amount of death benefit
a insurance company that is domiciled in one country and transacts insurance in another is:
alien insurer
viatical settlements
allow someone living with a life-threatening condition to sell their existing life insurance policy and use the proceeds when they are most needed, before their death. They usually recieve a percentage of the face value from a third party who purchases the policy
which type of authority is based on the actions, words, or deeds of the principal?
apparant
All other factors being equal, the least expensive first-year premium payment is found in a) Level Term. b) Annually Renewable Term. c) Increasing Term. d) Decreasing Term.
b) Annually Renewable Term. Annually renewable term is the purest form of term insurance. The death benefit remains level, but the premium increases each year with the insured's attained age. In decreasing policies, while the face amount decreases, the premium remains constant throughout the life of the contracts. In level term and increasing term policies, the premium also remains level for the term of the policy. Therefore, in the other types of level policies, the first-year premium would not be different from any other year.
In which of the following scenarios will repayment of funds take place per the Medicaid Estate Recovery Act? a) The mother of a 10-year-old died after receiving 8 months of Medicaid payments b) Before her death, a 23-year-old was living in a long-term nursing facility paid for with Medicaid funds c) A Medicaid recipient is survived by his wife d) The 22-year-old son of a Medicaid recipient is blind
b) Before her death, a 23-year-old was living in a long-term nursing facility paid for with Medicaid funds Estate recovery cannot take place if the Medicaid recipient, at the time of his or her death, has a surviving spouse, a child younger than 21 or a child who is blind or permanently disabled.
Which of the following riders would NOT cause the Death Benefit to increase? a) Accidental Death Rider b) Payor Benefit Rider c) Guaranteed Insurability Rider d) Cost of Living Rider
b) Payor Benefit Rider Payor Benefit Rider does not increase the Death Benefit; it only pays the premium if the payor is disabled or dies. With Guaranteed Insurability Rider, the policyowner can increase DB at specified ages or events, i.e. marriage or birth of a child; Cost of Living Rider increases DB to keep pace with inflation; in Accidental Death Rider, if the insured dies from an accident, DB is a multiple of the Face Amount.
All of the following are considered to be supplemental benefits under an HMO plan EXCEPT a) Prescription drugs. b) Preventive services. c) Long-term care. d) Mental health care.
b) Preventive services. HMOs have the option of providing one or more of the following supplemental benefits: long-term care, nursing services, home health care, prescription drugs, dental care, vision care, mental health care, and substance abuse services.
How are funds contributed to a tax-sheltered annuity treated for taxation? a) The contributions are taxed as income for the employee, but are tax free upon withdrawal. b) The contributions are not included as income for the employee, but are taxable upon distribution. c) The contributions are never taxed. d) The contributions are taxed as income for the employee.
b) The contributions are not included as income for the employee, but are taxable upon distribution. Funds contributed are excluded from the employee's current taxable income, but are taxable upon withdrawal.
When a replacement is involved, a replacing insurance company is responsible for all of the following EXCEPT: a. obtain from the producer a list of the applicant's life insurance or annuity contracts to be replaced b. provide a copy of the Important Notice Regarding Replacement of Life Insurance to the applicant. c. send the existing insurance company a written notice of replacement d. include a policy summary on the proposed life insurance in the communication with the existing company
b. provide a copy of the Important Notice Regarding Replacement of Life Insurance
Unlike the dividend itself, the interest earned on dividends is a. 40% taxable, similar to a capital gain b. taxable c. nontaxable d. tax deductible
b. taxable- dividends are a return of unused premiums on which the insured has already paid taxes. Any interest earned is taxable as ordinary income
Under the 401(k) bonus or thrift plan, the employer will contribute a) 30% of what the employee contributes. b) 75% of what the employee contributes. c) An undetermined percentage for each dollar contributed by the employee. d) All of the money to the plan.
c) An undetermined percentage for each dollar contributed by the employee. Under the bonus or thrift plan, the employer will contribute certain amount or percentage for each dollar contributed by the employee. There is no specific rule as to how much the employer must contribute.
When a replacement is involved, a replacing insurance company is responsible for all of the following EXCEPT a) Include a policy summary on the proposed life insurance in the communication with the existing company. b) Obtain from the producer a list of the applicant's life insurance or annuity contracts to be replaced. c) Provide a copy of the Important Notice Regarding Replacement of Life Insurance to the applicant. d) Send the existing insurance company a written notice of replacement.
c) Provide a copy of the Important Notice Regarding Replacement of Life Insurance to the applicant. Providing a copy of the Important Notice Regarding Replacement is a producer's responsibility.
When benefits are paid directly to the insured under a health insurance policy, the policy provides benefits on what type of basis? a) Limited b) Scheduled c) Reimbursement d) Service
c) Reimbursement The insured is responsible to pay the provider, and the policy reimburses the insured for covered expenses.
An insured submitted a notice of claim to the insurer, but never received claims forms. He later submits proof of loss, and explains the nature and extent of loss in a hand-written letter to the insurer. Which of the following would be true? a) The insurer will be fined for not providing the claims forms. b) The insured must submit proof of loss to the Department of Insurance. c) The insured was in compliance with the policy requirements regarding claims. d) The claim most likely will not be paid since the official claims form was not submitted.
c) The insured was in compliance with the policy requirements regarding claims. If claims forms are not furnished to the insured, the claimant is deemed to have complied with the requirements of the policy if he or she submits written proof of the occurrence, nature of the loss, and extent of loss to the insurer
An insured is the recipient of an accidental death and dismemberment policy purchased by his employer. The policy pays triple indemnity in case of accidental death. If the insured died as a result of an accident stipulated in the policy, how will the benefits paid be taxed? a) Benefits received are considered income tax free b) Benefits received will be taxed as capital losses c) No taxes will be taken because no benefits will be paid d) Benefits will be taxed as ordinary income
Answer: A
Based on Human Life Value Approach, which of the following is not used to calculate and individuals' life value? a)Predicted needs of the family after the insured's death b) Insured's current and future income c) Insured's anbnual expenses d) Effect of inflation on income over time
Answer: A The Human Life Value Approach to determining the value of an individual's life requires the calculation of probable future earnings of the insured, which involves wages, expenses, inflation, amount of time until retirement, and the time value of money. Predicted needs of the family after the insured's death are used in the needs approach.
A health insurance policy lapses but is reinstated within an acceptable timeframe. How soon from the reinstatement date will coverage for accidents become effective? a) After 21 days b) After 31 days c) Immediately d) After 14 days
Answer: C
What is the goal of the HMO? a) Limiting the deductibles and coinsurance to reduce costs b) Providing health services close to home c) Early detection through regular checkups d) Providing free health services
Answer: C
All of the following are true regarding the guaranteed insurability rider EXCEPT: a) The insured may purchase additional insurance up to the amount specified in the base policy b) It allows the insured to purchase additional amount of insurance without proving insurability only at specified dates or events c) This rider is available to all insured d) The insured may purchase additional coverage at the attained age
Answer: C The guaranteed insurability rider may be structured to allow for specific additional amounts of insurance to be purchased at specific ages, dates, and events without proving insurability, however, the coverage is purchased at the insured's attained age and the maximum allowable purchase is specified in the base policy. This rider usually expires at the insured's age 40.
What is the amount a physician or supplier bills for a particular service or supply? a) Assignment b) Coinsurance c) Approved amount d) Actual charge
Answer: D
Which of the following is NOT included on Part 1 of the application for insurance? a) Applicant's gender b) Applicant's occupation c) Applicants' marital status d) Applicant's medical background
Answer: D
Which of the following is used to determine the annuity amounts that are not taxable? a) Pro rata ratio b) Exclusion index c) Market-adjusted annuities index d) Exclusion ratio
Answer: D
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: a) For 20 years or until death, whichever occurs first b) Until the policy owner's age is 65 c) For 20 years d) Until the policy owner's age is 100, when the policy matures
Answer: A Under a 20-pay life policy, all of the premiums necessary to cause the policy to endow at the insured's age 100 are paid during the first 20 years: however, if the insured dies before all of the planned premiums are paid; the beneficiary will receive the face amount as a death benefit
Before a business entity may legally transact insurance, and must perform all the following except a) Obtain an insurance producer license b) Designate license producer c) Procure a staff of at least one natural person d) File an application with the insurance commissioner
Answer: C
If one takes Social Security retirement benefits at age 62, what needs to be done at age 65 to qualify for medicare? a) Appear for a physical at the social security office b) Apply at a local Social Security office c) Nothing d) Apply for coverage through the state
Answer: C
The requirement that agents must account for all insurance funds collected, and without the express consent of the insurance companies are not permitted to co-mingle those funds with their own funds is known as a) Fiscal responsibility b) Accepted accounting principal c) Fiduciary responsibility d) Premium accountability
Answer: C
Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the 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? a) Whole life policies b) Ordinary life policies c) Joint life policies d) Individual endowment policies
Answer: C
What is the benefit of experience rating? a) Experience rating helps employees with low claims experience become exempt from group premiums b) Experience rating helps employers with high claims experience because they get lower premiums c) Experience rating helps employers with low claims experience because they get lower premiums d) Experience rating helps employers with high claims experience get group coverage.
Answer: C
What qualifications must an agent hold in order to sell variable life insurance policies? a) National Association of Insurance Commissioners (NAIC) registration b) State licensing to sell life insurance and variable products c) Both state and federal licensing d) Same certification as fixed life policies
Answer: C
Which type of authority is based on the actions and words of the agent? a) Fiduciary b) Implied c) Apparent d) Express
Answer: C
Who must a business entity designate as being responsible for its compliance with insurance laws? a) Anyone b) An employee that has been approved by the Commissioner c) A licensed producer d) A lawyer
Answer: C
If the owner prematurely surrenders his deferred annuity before the annuitization period begins, which of the following is most likely to occur? a) The owner will receive the premium payments that have been paid into the annuity, plus any interest, minus the surrender charge b) A surrender charge will be imposed that is equal to 3 of the owner's monthly annuity payments c) A surrender charge will not be imposed because the account has been open for at least 1 year d) The owner will forfeit any premiums he has paid into the account, but will receive any interest earned on the account.
Answer: A
An insured decides to surrender his whole life insurance policy which you purchased 30 years ago. He had paid annual premiums of $500 while the policy was in force (which added up to $15,000.) When he surrendered the policy, the cash surrender value was $18,000. What part of the surrender value would be income taxable? a) $1,000 b) $18,000 c) $15,000 d) $3,000
Answer: D
The provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is called the a. total contract b. aleatory contract c. complete contract d. entire contract
d. entire contract-the policy with the attached application which is a mandatory provision in life insurance. This provision limits the use of evidence other than the contract and the application in a test of the contract's validity.
A man wants to buy a life insurance policy in which he can count on guaranteed minimum benefits. Which type should he buy? a. level b. variable c. solid d. fixed
d. fixed- life insurance policies offer minimum guaranteed or fixed benefits stated in the contract. the other type of policy, variable life, varies in its cash value because its value is based on the stocks that support it
The policyowner of an Adjustable Life policy can increase premium payments and a. have a lower non forfeiture option b. have a higher cash value interest rate c. have a higher face amount without proof of insurability d. have a limited pay policy
d. have a limited pay policy- Adjustable life policy has the following privileges 1. increasing decreasing the premium 2. changing the premium-paying period 3. increasing or decreasing the face amount of coverage 4. changing the period of protection
Stranger-oriented life insurance policies are in direct opposition to the principle of a. law of large numbers b. good faith c. indemnity d. insurable interest
d. insurable interest-STOLI purchaser doesn't know the insured, or have any interest in the insured's longevity, so it violates the principle of insurable interest
What are the personal uses of life insurance? a. insured protection, estate creation and cash accumulation b. cash accumulation, estate depletion and liquidity c. beneficiary protection, liquidity, estate creation and cash accumulation d. survivor protection, estate creation and conservation, cash accumulation and liquidity
d. survivor protection, estate creation and conservation, cash accumulation and liquidity
Which of the following may NOT be included in an insurance company's advertisement? a. their policies' limitation or exclusions b. the name of the specific agent c. an identification of a limited policy as a limited policy d. that its policies are covered by a state Guaranty Association
d. that its policies are covered by a state Guaranty Association-that is illegal for insurers to state that their policies are guaranteed by the existence of a Guaranty Association
under what conditions would a contract between an insurer and prospective insured be legal? a. the applicant is drunk at the time of the application b. the applicant is a 12-year-old student c. the applicant is high on meth at the time of the application d. the applicant has been convicted of a felony
d. the applicant has been convicted of a felony-both parties must be of legal age and mentally competent.
Who is the owner and who is the beneficiary on a Key Person Life Insurance Policy? a. the employer is the owner and the Key Person is the beneficiary b. The Key Person is the owner and beneficiary c. The Key Person is the owner and the employer is the beneficiary d. the employer is the owner and beneficiary
d. the employer is the owner and beneficiary- with key-person coverage, the business (the employer) is the applicant, owner, premium payer, and beneficiary.
With a Straight Life policy, what happens if the insured lives to age 100? a. the policy matures and the face value is paid to the beneficiary b. the policy matures and the cash value is used to purchase a single premium policy c. the policy will stay in force until the insured's death d. the policy matures and the cash value is paid to the insured.
d. the policy endows (matures) and the cash value, equal to the face amount, is paid to the insured
What is the purpose of key person insurance? a. to provide health insurance to the families of key employees b. to insure retirement benefits are available to all key employees c. to maintain an account that insures the owner of a company remains solvent d. to lessen the risk of financial loss because of the death of a key employee
d. to lessen the risk of financial loss because of the death of a key employee-A business can suffer a financial loss because of the premature death of a key employee that has specialized knowledge, skills or business contract.
An insured has been diagnosed with a life-threatening disease, and is given approximately six months to live. The insured is in a hard financial situation which will worsen with the upcoming medical expenses. Which of the following options could he utilize right now? a. liquidity b. surrender c. change of beneficiary d. viatical settlement
d. viatical settlement
which of the following is NOT typically excluded from life policies? 1. death that occurs while involved in a felony 2. death due to war and military service 3. death due to plane crash for a fare-paying passenger 4. self-inflicted death
death due to plane crash for fare-paying passenger
which of the following terms is used to name the nontaxed return of unused premiums? 1. dividend 2. premium return 3. interest 4. surrender
dividend
all of the following statements concerning dividends are true EXCEPT 1. lower insurance company costs generate higher dividends 2. they stem from favorable underwriting experience 3. favorable investment results generate higher dividends 4. dividend amounts are guaranteed in the policy
dividend amounts are guaranteed in the policy
for a retirement plan to be qualified, it must be designed for the benefit of 1. key employee 2. employer 3. IRS 4. employees
employees
all of the following statements are true regarding tax-qualified annuities EXCEPT 1. tax accumulation is deferred 2. they must be approved by the IRS 3. withdraws are taxed 4. employer contributions are no tax deductible
employer contributions are not tax deductible
when a life insurance policy is cancelled and the insured has selected the extended term nonforfeiture option, the cash value will be used to purchase term insurance that has a face amount 1. equal to the original policy as long as a period of time that the cash values will purchase 2. in lesser amounts for the remaining policy term of age 100 3. equal to the cash value surrender from the policy 4. the same as the original policy minus the cash value
equal to the original policy as long as a period of time that the cash values will purchase
items stipulated in the contract that the insurer will not provide coverage for are found in the 1. benefit payment clause 2. consideration clause 3. exclusions clause 4. insuring clause
exclusions clause
when an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called a(n) 1. key person policy 2. fraternal association 3. aleatory contract 4. executive bonus
executive bonus
what authorities can an agent hold?
express and implied
which nonforfeiture option has the highest amount of insurance protection? 1. extended term 2. conversion 3. decreasing term 4. reduced paid-up
extended term
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? 1. interest only 2. fixed period 3. life with period certain 4. fixed amount
fixed period
all of the following are dividend options EXCEPT 1. reduction of premiums 2. paid-up additions 3. fixed-period installments 4. accumulated at interest
fixed-period installments
D. 5yrs Ech. Agent and agency must keep a file of all advertising printed published or prepared for 5yrs
for how many years is insurer required to maintain a complete file of its advertisements
a insurance company that is domiciled in one state and transacts insurance in another is:
foreign
an insurance company that is formed under the laws of another state is known as which type of insurer?
foreign
in a direct rollover, how is the money transferred from one plan to the new one? 1. from the original plan to the original custodian 2. from trustee to trustee 3. from trustee to the participant 4. from participant to the new plan
from trustee to trustee
if an insured worker has earned 40 quarters of coverage, the worker's status under social security disability is 1. permanently insured 2. fully insured 3. partially insured 4. correctly insured
full insured
all of the following are business uses of life insurance EXCEPT 1. funding against financial loss caused by the death of a key employee 2. funding business continuation agreements 3. funding against general company financial loss 4. compensating executives
funding against general company financial loss
which is TRUE about the cash surrender nonforfeiture option? 1. funds exceeding the premium paid are taxable as ordinary income 2. after the cash surrender, the insured is covered for a grace period of 1 month 3. the policy remains active for sometime after the policyholder opts for cash surrender 4. policyholder receives the original cash value of the policy
funds exceeding the premium paid are taxable as ordinary income
Human life value approach
gives the insured an estimate of what would be lost to the family in the event of the premature death of the insured. It looks at eh insured's wages, inflation, the # of years to retirement, and the time value of money.
the automatic premium loan provision is activated at the end of the 1. grace period 2. free-look period 3. elimination period 4. policy period
grace period
what required provision protects against unintentional lapse of the policy? 1. reinstatement 2. grace period 3. assignment 4. payment of premiums
grace period
in life insurance policies, cash values increases 1. are income taxable immediately 2. are taxed annually 3. are only taxed when owner reaches age 65 4. grow tax deferred
grow tax deferred
concerning insurance, the definition of a fiduciary responsibility is
handling insurer funds in a trust capacity
which of the following is TRUE of a qualified plan? 1. has a tax benefit for both employer and employee 2. does not need to have a vesting schedule 3. may discriminate in favor of highly paid employees 4. may allow unlimited contributions
has a tax benefit for both employer and employee
an insured has a modified endowment contract. he wants to withdraw some money in order to pay medical bills. which of the following is true? 1. he will not have to pay a penalty, regardless of age 2. he cannot withdraw money from his MEC before age 59 1/2 3. he will have to pay a penalty if he is younger than 59 1/2 4. he will have to pay a penalty regardless of his age
he will have to pay a penalty if he is younger than 59 1/2
units with the same or similar exposure to loss are referred to as:
homogeneous-the basis of insurance is sharing risk between a large homogeneous group with similar exposure to loss.
B. until the beneficiary death
how long will the beneficiary receive payments under the single life settlement option A. Until the insureds age 100 B. Until the beneficiary's death C. Until the beneficiary's death D. For a specific period of time
a father purchases a life insurance policy on his teenage daughter and adds the pay benefit rider. in which of the following scenarios will the rider waive the payment of premium? 1. if the daughter for any length of time 2. if the father is disabled for more than 6 months 3. if the father is disabled for at least a year 4. if the daughter is disabled for more than 3 months
if the father is disabled for more than 6 months
an individual has been diagnosed with Alzheimer's disease. he is insured udner a life insurance policy with the accelerated benefits rider. which of the following is true regarding taxation of the accelerated benefits? 1. principal is tax free, but interest is taxed 2. entire benefit will be received tax free 3. the entire living benefit is considered taxable income 4. portion of the benefit up to a limit is tax free; the rest is taxable income
portion of the benefit up to a limit is tax free; the rest is taxable income
if a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back? 1. the balance of the loan will be taken out of the death benefit 2. the policy beneficiary receives the full death benefit 3. the policy beneficiary takes over the loan payments 4. the policy is rendered null and void
the balance of the loan will be taken out of the death benefit
a corporation is the owner and beneficiary of the key person life policy. if the corporation collects the policy benefit, then 1. the benefit is received tax free 2. the benefit is subject to the exclusionary rule 3. IRS has no jurisdiction 4. the benefit is received as taxable income
the benefit is received tax free
which of the following is an example of liquidity in a life insurance contract? 1. the death benefit paid to the beneficiary 2. the flex premium 3. the money in a savings account 4. the cash value available to the policyowner
the cash value available to the policyowner
which of the following is incorrect concerning a noncontributory group plan? 1. the employee receive individual policies 2. they help to reduce adverse selection against insurer 3. they require 100% employee participation 4. the employer pays 100% of the premiums
the employees receive individual policies
all of the following statements concerning employer sponsored nonqualified retirement plan are true EXCEPT 1. plan is legal method of accumulating money for retirement needs. 2. plan can discriminate as to who may participate 3. plan is not approved to favorable tax treatment by IRS 4. the employer can receive a current tax deduction for any contribution made into a plan
the employer can receive a current tax deduction for any contribution made into a plan
who is the owner and who is the beneficiary on a key person life insurance policy? 1. the key employee is the owner and the employer is the beneficiary 2. the employer is the owner and beneficiary 3. the employer is the owner and the key employee is the beneficiary 4. the key employee is the owner and beneficiary
the employer is the owner and beneficiary
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 an accident on June 1. which of the following statement best describes what will happen? 1. the insurer will pay a reduce death benefit to the beneficiary 2. the insurer will pay the death benefit minus one month's premium 3. the insurer will pay nothing because the employee has terminated his group insurance and hasn't started individual one 4. the insurer will pay the full death benefit from the group policy to the beneficiary
the insurer will pay the full death benefit from the group policy to the beneficiary
what first three elements must be present before a pure risk can be insured?
the loss must: 1. be due to chance (outside the insured's control) 2. be definite and measurable (definite to a cause, time, place, and amount) 3. be statistically predictable (enables insurers to estimate the average frequency and severity of future losses)
what last three elements must be present before a pure risk can be insured?
the loss: 4. cannot be catastrophic (like wars or nuclear events) 5. loss exposure to be insured must be large (large pool to be insured and grouped into classes with similar risks-law of large numbers) 6. insurance must not be mandatory (must not be required to issue a policy to each applicant applying. they need the ability to require certain underwriting guidelines to be met)
what is the advantage of reinstating a policy instead of applying for a new one? 1. the face amount can be increased 2. the cash values have gained interest while the policy was lapsed 3. the original age is used for premium determination 4. proof of insurability is not require
the original age is used for premium determination
D. set premium rate the insurer sets premium rates upon underwriting consideration
the ownership provision entitles the policyowner to do all the following EXCEPT A. receive a policy loan B. assigned the policy C. designate a beneficiary D. Set premium rates
all of the following are true of key person insurance EXCEPT 1. the key employee is the insured 2. the plan is funded by permanent insurance only 3. there is no limitation on the number of key employee plans in force at nay one time 4. the employer is the owner, payor and beneficiary of the policy
the plan is funded by permanent insurance only
if an insured continually uses the automatic premium loan option to pay the policy premium 1. the policy will terminate when the cash value is reduced to nothing 2. the face amount of the policy will be reduced by the automatic premium loan amount 3. the cash value will continue to increase 4. the insurer will increase the premium amount
the policy will terminate when the cash value is reduced to nothing
insurable interest
the possibility of losing money or something of value in the event of loss, property which may be the subject of insurance (insurable risk), the person purchasing a life insurance policy is actually interested in the longevity of the insured
when a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy? 1. it is reduced to the amount of what the cash value would buy as a single premium 2. it is increased when extra premiums are paid 3. it decreases over the term of the policy 4. it remains the same as the original policy, regardless of any differences in value
it is reduced to the amount of what the cash value would buy as a single premium
which of the following applies to the 10-day free-look privilege? 1. it is granted only at the option of the agent 2. it permits the insured to return the policy for a full refund of premiums paid 3. it allows the insured 10 days to pay the initial premium 4. it can be waived only by the insurance company
it permits the insured to return the policy for a full refund of premiums paid
which of the following statements is TRUE about a policy assignment? 1. it authorizes an agent to modify the policy 2. it transfers rights of ownership from the owner to another person 3. it is the same as a beneficiary designation 4. it permits the beneficiary to designate the person to receive the benefits
it transfers rights of ownership from the owner to another person
type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called 1. joint and survivor 2. fixed period 3. fixed amount 4. joint life
joint and survivor
which of the following terms means a result of calculation based on the average number of month the insured is projected to live due to medical history and mortality factors? 1. morbidity 2. life expectancy 3. mortality rate 4. risk exposure
life expectancy
what is the other term for the cash payment settlement option? 1. principal amount 2. face amount 3. proceeds 4. lump sum
lump sum
which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insured's death? 1. business partner of the insured 2. wife of the decease insured 3. former wife of the deceased insured 4. minor son of the insured
minor son of the insured
if a life insurance policy develops cash value faster than a seven-pay whole life contract, it is 1. endowment 2. multiplicative policy 3. modified endowment contract 4. accelerated policy
modified endowment contract
if a life insurance policy develops cash value faster than a seven-pay whole life contract, it is 1. multiplicative policy 2. modified endowment contract 3. accelerated policy 4. endowment
modified endowment contract
which of the following is NOT true regarding policy loans? 1. an insurer can charge interest on outstanding policy loans 2. a policy loan may be repaid after the policy is surrendered 3. money borrowed from the cash value is taxable 4. policy loans can be repaid at death
money borrowed form the cash value is taxable
an individual's tendency to be dishonest would be indicative of a:
moral hazard-an applicant that is dishonest in completing an application for insurance or submitting fraudulent claims would be deemed a moral hazard and could be uninsurable from an underwriting standpoint
the dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the 1. accelerated endowment 2. paid-up additions 3. one-year term option 4. paid-up option
one-year term option
in a life settlement contract, whom does the life settlement broker represent 1. owner 2. insurer 3. beneficiary 4. life settlement intermediary
owner
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 1. one-year term purchase 2. accumulation at interest 3. reduction of premiums 4. paid-up additions
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? 1. pay the full death benefit and refund excess premium 2. pay a reduced death benefit 3. pay the full death benefit 4. pay nothing; there was a misrepresentation on the application
pay a reduced death benefit
A participating insurance policy may:
pay dividends to the policy owner based upon actual mortality cost, plus interest earned, less expenses of running the business
an insured purchases a policy 2008 and died in 2013. the insurance company discovers at that time that the insured concealed information during the application process. what can they do? 1. sue for the right to not pay the death benefit 2. pay the death benefit 3. refuse to pay the death benefit 4. pay a decrease death benefit
pay the death benefit
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? 1. jumping juvenile 2. juvenile premium provision 3. waiver of premium 4. payor benefit
payor benefit
which of the following riders would NOT cause death benefit to increase? 1. accidental death rider 2. payor benefit rider 3. guaranteed insurability rider 4. cost of living rider
payor benefit rider
all of the following are general requirements of a qualified plan EXCEPT 1. plan must be permanent, written and legally binding 2. plan must provide an offset for social security benefits 3. plan must be communicated to all employees 4. plan must be for the exclusive benefits of the employees and their beneficiaries
plan must provide an offset for social security benefits
Retention
planned assumption of risk or acceptance of responsibility for the lossb by an insured through the use of deductibles, co-payments or self insurance
which of the following best defines the "owner" as it pertains to life settlement contracts? 1. fiduciary for the contract 2. insurance provider 3. policyowner of the life insurance policy 4. financial entity tat sponsors the transaction
policyowner of the life insurance policy
all of the following would be eligible to establish a keogh retirement plan EXCEPT 1. the president and employee of a family corporation 2. a sole proprietor of a service station who employs four employees 3. a sole proprietor of a film development store with no employees 4. a hair dresser who operates her business at her house
the president and employee of a family corporation
in insurance policies, contract ambiguities are automatically ruled in the favor of the insured. what privilege does the insurer have in order to balance this?
the right to determine the wording of a policy-the policyholder will receive benefits denied due to a contract ambiguity
B. avoidance
the risk management technique that is used to prevent a specific loss by not exposing yourself too that activity is called? A. sharing B. avoidance C. transfer D. reduction
an insured has chosen joint and 2/3 survivor as the settlement option. what does this mean to the beneficiaries 1. one of the beneficiaries will receive 1/3 and the other 2/3 of the proceeds when the insured dies 2. the surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive 3. the beneficiary will receive 2/3 of the lump sum up front, and the remaining 1/3 will be paid over time 4. the beneficiary will receive 2/3 of the total benefit, with the final 1/3 payable when the first beneficiary dies
the surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive
blackout period
the time during which the surviving spouse and/or children do not recieve social security survivor benefits. (youngest child turns 16-until the spouse qualifies for retirement benefits.)
which of the following is TRUE about nonforfeiture values? 1. policyowners do not have the authority to decide how to exercise nonforfeiture values 2. they are required by state law to be included in the policy 3. they are optional provisions 4. table showing nonforfeiture values for the next 10 years must be included in the policy
they are required by state law to be included in the policy
which of the following is true regarding taxation of accelerated benefits under a life insurance policy? 1. they are tax free to terminally ill insured 2. they are always taxable to chronically ill insured 3. they are always taxed 4. there is a 10% penalty for early distribution of the death benefit
they are tax free to terminally ill insured
which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner? 1. a buy-sell agreement 2. family term rider 3. third-party ownership 4. an irrevocable beneficiary
third-party ownership
which of the following employees under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated? 1. those who have no history of claims 2. those who have been insured under the plan for at least 5 years 3. those who have worked in the company for at least 3 years 4. those who have dependents
those who have been insured under the plan for at least 5 years
what is the purpose of key person insurance? 1. to insure retirement benefits are available to all key employees 2. to maintain an account that insures the owner of a company remains solvent 3. to lessen the risk of financial loss because o the death of a key employee 4. to provide health insurance to the families of key employees
to lessen the risk of financial loss because o the death of a key employee
what is the purpose of a fixed-period settlement option? 1. to provide a guaranteed income for a certain amount of time 2. to settle the insurance company's liability 3. to provide a guaranteed income for life 4. to provide a guaranteed amount of money each month
to provide a guaranteed income for a certain amount of time
an absolute assignment is a 1. change of insurer 2. transfer all ownership rights in a policy 3. transfer some ownership rights in a policy 4. change of beneficiary
transfer of all ownership rights in a policy
an insured modifies his insurance claims, illegally adjusting them to display a lower amount. what insurance concept does this violate?
utmost good faith
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? 1. estate liquidation 2. nonpayment of premium 3. change of beneficiary 4. viatical settlement
viatical settlement
what is the name of the insured who enters into a viatical settlement? 1. viatical broker 2. viator 3. third party 4. contingent
viator
cash value the amount available to the policyowner for a loan is the policies cash value. If there are any outstanding loan that amount will be reduced by the amount of the unpaid loan interest
what limits the amount of policy owner can borrow from the whole life insurance policy
In forming an insurance contract, when does an acceptance usually occur?
when the insurer approves a prepaid application
D. It is Level Term insurance
which of the following best describes annually renewable term insurance? A. it requires proof of insurability at each renewal B. Neither the premium nor the death benefit is affected by the insureds age C. It provides annually increasing death benifits D. It is level Term insurance
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 without creating adverse tax consequences? a) Section 1035 Policy Exchange b) Modified Endowment Exchange c) 401(k) Plan d) Section 457 Deferred Compensation Plan
Answer: A
What type of group rating uses the actual experience of the group as a factor in developing the rates to be charged? a) Experience rating b) District rating c) Community rating d) Individual rating
Answer: A
When an individual is covered under 2 health insurance policies that have duplicate benefits which could make a claim for benefits because of an injury or illness profitable, it is called: a) Overinsurance b) Double indemnity coverage c) Fraternal coverage d) Pro-rata coverage
Answer: A
Which is the correct comparison between survivorship life and a traditional joint life policy? a) Joint life pays a death benefit on the first death, while Survivorship Life pays on the last death b) A traditional joint life policy has a lower premium than a Survivorship Life policy c) Joint Life policies can cover more than two individuals, while Survivorship Life is limited to two. d) The premiums for both are determined by a combined general health rating.
Answer: A
Which of the following best describes fixed-period settlement option? a) Both the principal and interest will be liquidated over a selected period of time b) Only the principal amount will be paid out within a specified period of time c) The death benefit must be paid out in a lump sum within a certain time period d) Income is guaranteed for the life of the beneficiary
Answer: A
Which of the following is true regarding a single life settlement option? a) It provides income the beneficiary cannot outlive b) Payments continue until the entire principal is exhausted c) Proceeds are paid out in lump sum d) It provides income for a specified period of time
Answer: A
Which of the following may NOT be included in an insurance company's advertisement? a) That its policies are covered by a state Guaranty Association b) Their policies' limitations or exclusions c) The name of a specific agent d) An identification of a limited policy as a limited policy
Answer: A
Which of the following statements pertaining to Medicare Part A is correct? a) Medicare Part A is automatically provided when an individual qualifies for Social Security benefits at age 65 b) For the first 90 days of hospitalization, Medicare Part A pays 100% of all covered services, except for the initial deductible c) Individuals with ESRD do not qualify for Part A d) Each individual covered by Medicare Part A is allowed one 90 day benefit period per year
Answer: A
Which of the following would NOT be an underwriting consideration for a health insurance applicant? a) Applicant's sexual orientation b) Applicant's personal habits c) Applicant's medical history d) Applicant's credit rating
Answer: A
If the insured under a disability income insurance policy changes to a more hazardous occupation after the policy has been issued, and a claim is fixed, the insurance company should do which of the following: a) Adjust the benefit in accordance with the increased risk b) Cancel the policy c) Increase the premium d) Exclude coverage for on-the-job delivery
Answer: A A part of the premium rating concerns the hazard of occupation
D. Other insurance coverage Part II of the application contains questions regarding the applicants health history. Part I of the application incluudes questions regarding current coverage being applied for as well as any insurance coverage with the same or other insures.
Part II of the application provides questions regarding all of the following EXCEPT? A. family health history B. alcohol and tobacco consumption C. recent surgeries D. other insurance coverage
Lump-sum needs
Post-mortem (costs associated with death): medical expenses, funeral expenses, day to day expenses of maintaining family Other Needs and Objectives: estate taxes, day care, insurance premiums, etc.
When an insurance company agrees to automatically assume a portion of the risk written by another insurance company, it is known as a(n):
Reinsurance treaty-insurers limit their exposure to catastrophic losses by purchasing insurance from a reinsurance company. a reinsurance agreement whereby the re insurer automatically assumes the risks ceded to it is a reinsurance treaty.
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
according to the entire contract provision, the policy must contain 1. listing of the insured's former insurer(s) for incontestability provisions 2. a copy of the original application for insurance 3. a declaration page with summary of insureds 4. buyer's guide to life insurance
a copy of the original application for insurance
Which of the following are NOT fundable by annuities? a) Death benefits b) Cash accumulation for any reason c) A person's retirement d) Estate liquidation
a) Death benefits Annuities are most commonly used to fund a person's retirement, but they can technically be used to accumulate cash for any reason. Annuities can also be used to liquidate an estate. Annuities do not provide death benefits; those are provided by life insurance.
A policy which covers medical costs related to a specific condition is called a a) Dread Disease Policy. b) Condition-Specific Policy. c) Specific Condition Policy. d) Limited Coverage Policy.
a) Dread Disease Policy. Dread Disease policies cover medical expenses for a particular medical condition, such as cancer or heart disease.
A Universal Life insurance policy has two types of interest rate that are called a) Guaranteed and Current b) Option A and Option B c) Fixed and Variable d) Minimum and Target
a) Guaranteed and Current The insurer credits the cash value in the policy with a current (nonguaranteed) interest rate and backs the cash value with a contract (lower guaranteed) rate of interest.
Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client? a) Limited pay whole life insurance b) 10-year endowment c) Life annuity, period certain d) Increasing term insurance
a) Limited pay whole life insurance Premium payments will cease at her age 65, but coverage will continue to her death or age 100.
Kayla's husband died in a plane crash. She needs a new source of funding that will help put her child through daycare. Which of the following would be the best source? a. estate conservation b. life insurance proceeds c. state education waiver d. viatical settlement
b. life insurance proceeds- day care is considered a need-based expense that can be paid by life insurance proceeds
Attempting to determine how much insurance an individual would require base upon their financial objectives is known as: a. viatical approach b. needs approach c. human life value approach d. estate planning
b. needs approach-determines how much benefit would be necessary to replace the loss income and increased expense should the insured die prematurely.
An applicant wants to buy a policy that has cash value element. Which type should she buy? a. term b. permanent c. stock d. investment
b. permanent- death protection and savings/cash value option
Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value? a. effect of inflation on income over time b. predicted needs of the family after the insured's death c. insured's current and future income d. insured's annual expenses.
b. predicted needs of the family after the insured's death- are used in the needs approach. The Human Life Value Approach requires the calculation of probable future earnings of the insured, which involves wages, expenses, inflation, amount of time until retirement, and the time value of money.
If a life insurance policy has an irrevocable beneficiary designation, a. the owner can always change the beneficiary at will b. the beneficiary cannot be changed c. the beneficiary can only be changed with written permission of the beneficiary d. the beneficiary cannot be changed for at least 2 years
c. the beneficiary can only be changed with written permission of the beneficiary
Which of the following would NOT fall into the category of costs associated with death? a. final medical expenses of the insured b. day to day expenses of maintaining the family c. the expense of a vacation for surviving family members d. funeral expenses
c. the expense of a vacation for surviving family members
All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT: a. the employer pays a bonus to a selected employee to fund to policy b. it is considered a non qualified employee benefit. c. the policy is owned by the company d. any type of insurance policy may be used.
c. the policy is owned by the company.
An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have? a. term life b. limited access c. universal life d. controlled
c. universal life
An insured has a Modified Endowment Contract. He wants to withdraw some money in order to pay medical bills. Which of the following is true? a) He cannot withdraw money from his MEC before age 59 ½ b) He will have to pay a penalty if he's younger than 59 ½ c) He will have to pay a penalty regardless of his age d) He will not have to pay a penalty regardless of his age
Answer: B
An applicant who receives a preferred risk classification qualifies for: a) Lower premiums than a person who receives standard risk. b) Dividends payable for lack of claims c) Higher premiums than a person who receives sub-standard risk. d) Higher premiums than a person who receives a standard risk
Answer: A
Occasional visits by which of the following medical professionals will NOT be covered under LTC's home health care? a) Attending physician b) Registered nurses c) Licensed practical nurses d) Community-based organization professionals
Answer: A
A typical Accidental Death and Dismemberment policy covers all of the following losses EXCEPT: a) Life b) Income c) Eyesight d) Limb
Answer: B
All of the following would it would be different between qualified and nonqualified retirement plans EXCEPT: a) IRS approval requirements b) Taxation on accumulation c) Taxation of withdrawals d) Taxation of contributions
Answer: B
An individual has been making periodic premium payments on an annuity. The annuity income payments are scheduled to begin 2 years after the annuity was purchased. What type of annuity is it? a) Fixed b) Flexible premium c) Immediate d) Deferred
Answer: d) Deferred
An insured purchased a life insurance policy on his Life naming his wife as primary beneficiary, and his daughter is contingent beneficiary. Under what circumstances could the daughter collect the death benefit? a) If the primary beneficiary predeceases the insured b) The primary and contingent beneficiaries share death benefits c) With the primary beneficiary's written consent d) If the insured died from accidental means
Answer: A
What is the term used when a person sells his assets as a way to gain more money? a) Liquidation b) Buy-Sell c) Commerce d) Transfer
Answer: A
An absolute assignment is a: a) Change of beneficiary b) Change of insurer c) Transfer of all ownership rights in a policy d) Transfer of some ownership rights in a policy
Answer: C
To meet the Entire Contract provision, a policy must contain: a) A declarations page with a summary of insureds b) Buyer's guide to life insurance c) Listing of the insured's former insurer(s) for incontestability provisions d) A copy of the original application for insurance
Answer: D
What is the minimum number of continuing education credit hours that producers must complete on the subject of ethics each licensing period? a) 3 b) 5 c) 10 d) 12
Answer: A
Andrea wants to apply for an individual's life insurance policy. She has a nearly flawless health history and wants only limited coverage. Which type of information is the least that would probably be required? a) Application for insurance b) Attending physician's statement c) Statement of good health d) Paramedical report
Answer: A When smaller amounts of insurance are requested and there is no prior medical history of concern, the home office underwriter may make an underwriting decision solely on the basis of the application
All of the following cases show when a Small Employer Medical plan cannot be renewable EXCEPT a) When the small employer carrier elects to nonrenew all of its health benefit plans delivered or issued for delivery to small employers b) When the employer chooses to renew the plan c) For nonpayment of required premiums d) When the Commissioner/Director finds that the continuation of the coverage would not be in the best interests of the policyholders or certificate holders or may impair the carrier's ability to meet its contractual obligations
Answer: B
In cases where a covered employee is eligible for Medicare benefits to treat end stage renal disease with dialysis for kidney transplant, which of the following is correct? a) Medicare is primary for the first 12 months of treatment and then employer group insurance is secondary b) Medicare is the secondary payer during the first 30 months of treatment c) Medicare in the employer group insurance plan will share the cost equally d) Because Medicare does not cover treatment of ESRD the group plan will pay 100%
Answer: B
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? a) Cash refund b) Installments for a fixed period c) Installments for a fixed amount d) Installment refund
Answer: B
Albert and Brian are partners in the business. They produce a buy- sell agreement, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement? a) Permanent insurance b) Universal life insurance c) Any form of life insurance d) Term insurance
Answer: C
All of the following statements are true regarding installments for a fixed period Annuity settlement option EXCEPT: a) The payments are not guaranteed for life b) The insurance determines the amount for each payment c) It is a life contingency option d) It will pay the benefit only for a designated period of time
Answer: C
An individual has just been diagnosed with a quickly spreading, fatal form of cancer; his oncologist predicts that he will live for five months. He applies for individual life insurance. What risk classification will he most likely receive? a) Poor b) Provisional c) Declined d) Substandard
Answer: C
a
Rebating is an unfair trade practice and is regulated by law. All of the following would be considered to be rebating EXCEPT a. an agent uses misrepresentation to convice a person to cancel an existing policy and take a new policy from him b. an agent offers to share his commission with a policyholder
b
A LA insurance company ran an advertisment in June 08. When could the company discard the file on this advertisement? a. June 09 b. June 12
a
A situation in which a person can only lose or have no change represents a. Pure risk. b. Speculative risk.
b
Annually renewable term policies provide a level death benefit for a premium that a. Decreases annually. b. increases annually
A life insurance policyowner has an outstanding policy loan. What will the insurer most likely do? a) Charge interest on the loan b) Require payment of additional premium c) Assess a fine d) Cancel the policy
Answer: A
An employee becomes insured under a PPO plan provided by his employer. If the insured decides to go to a physician who is not a PPO provider, which of the following will happen? a) The PPO will pay reduced benefits b) The PPO will not pay any benefits at all c) The insured will be required to pay a higher deductible d) The PPO will pay the same benefits as if the insured had seen a PPO physician
Answer: A
An insured committed suicide one year after his life insurance policy was issued. The insurer a) Refund the premiums paid b) Pay the policy's cash value c) Pay the full death benefit to the beneficiary d) Pay nothing
Answer: A
Which of the following health care plans would most likely provide the insured/subscriber with comprehensive health care coverage? a) Basic medical expense plan b) Health maintenance organization plan c) Group dental plan d) Medical-surgical expense plan
Answer: B
Which of the following is NOT true regarding the Life with Guaranteed Minimum annuity settlement option? a) Payments can be made in installments and as a single cash refund b) It provides a higher monthly payment than a pure life annuity c) It is a life contingency option d) The beneficiary receives the remainder of the principal amount upon the annuitant's death
Answer: B
Which of the following riders would NOT cause the Death Benefit to increase? a) Accidental Death Rider b) Payor Benefit Rider c) Guaranteed Insurability Rider d) Cost of Living Rider
Answer: B
Which of the following would NOT be true regarding a $100,000 20-year level term policy? a) the policy will expire at the end of the 20 year period b) at the end of 20 years the policy's cash value will equal $100,000 c) the policy premiums will remain level for 20 years d) if the insured dies before the policy expired the beneficiary will receive $100,000
Answer: B
You bought an individual health insurance policy for yourself. Which of the following roles do you have? a) Insured b) Both subscriber and insured c) Subscriber d) Producer
Answer: B
Stranger-Originated Life Insurance (STOLI)
a person with no relationship to the insured purchases a life policy on the insured's life with the intent of selling the policy to an investor and profiting financially when the insured dies. It violates the principle of insurable interest
C. a limited pay policy
a policy owner of an adjustable life policy can increase premium payments and have which of the following? A. a higher cash value interest rate B.a higher face amount without proof of insurability C.a limited pay policy D.a lower nonforfeiture option
Sally purchases an individual health insurance policy on September 1. On September 7 her doctor informs her that she is four months pregnant. Her coverage will most likely pay a) All expenses except those related to the pregnancy. b) Only expenses related to the pregnancy. c) Nothing. d) All expenses.
a) All expenses except those related to the pregnancy. The pregnancy would not be considered a pre-existing condition if part of a group policy because of HIPAA, but since she has purchased an individual policy, all expenses would be covered except those relating to the pregnancy.
All of the following information about a customer must be used in determining annuity suitability EXCEPT a) Beneficiary's age. b) Tax status. c) Financial experience. d) Annual income.
a) Beneficiary's age. To ensure suitability of annuity products, producers must obtain relevant information about the consumer's age, income, financial status, tax status, financial experience and objectives. Beneficiary's age is not a suitability factor.
What type of benefit helps to pay for accidental injuries that are not severe enough to qualify as disabilities? a) Medical Reimbursement Benefit b) Partial Disability c) Basic Accidental Injury d) Accidental Death & Dismemberment
a) Medical Reimbursement Benefit Medical Reimbursement Benefits help to pay medical costs for accidental injuries that are not considered to be disabling.
Life insurance may be used to pay state inheritance taxes and federal estate taxes so that it is not necessary to sell off assets from the estate to pay these costs. This is called a. estate conservation b. estate creation c. survivor protection d. survivorship insurnce
a. estate conservation- life insurance may be used to pay state inheritance taxes and federal estate taxes so that it is not necessary to sell off assets from the estate to pay these costs. This is called estate conservation.
An applicant is seeking an insurance policy. In the underwriting process, it was determined that the applicant has some dangerous habits, a risky occupation, and poor health. Which of the following is TRUE concerning the policy premium? a. it will likely be higher because the applicant is a substandard risk b. it will likely be the average premium issued to standard risks c. the applicant's habits, occupation and health do not affect the premiums d. it will likely be lower because the applicant is preferred risk
a. it will likely be higher because the applicant is a substandard risk
Which of the following determines the length of time that benefits will be received under the Fixed Amount settlement option? a. size of each installment b. predetermined length of time stipulated in the contract c. length of income period d. amount of interest
a. size of each installment-the size determines the length of time that benefits are received under the Fixed Amount settlement option. It logically follows that larger installments translate into shorter benefit periods.
Which of the following types of risk will result in the highest premium? a. substandard risk b. standard risk c. preferred risk d. all risks pay equal premiums
a. substandard risk-under average insurance risk due to physical condition, personal or family history of disease, occupation, habits or hobbies. This rating incurs the highest premium if policy is issued.
Which of the following would be least likely to be considered a legitimate need that would be paid by insurance proceeds? a. vacation travel expenses b. travel expenses for family to come to the funeral c. debt cancellation d. day care
a. vacation travel expenses
In a life settlement transaction, the owner must be made aware of his or her right to rescind the contract within how many days after the receipt of the life settlement proceeds? a) 10 days b) 15 days c) 30 days d) 90 days
b) 15 days The life settlement provider or broker must disclose that the owner has the right to change his or her mind. In other words, the owner may rescind a life settlement contract within 15 days after the receipt of the life settlement proceeds by the owner.
If the insurance provided on an individual ceases because of termination of employment or of membership in the class eligible for coverage, the individual will be entitled to have an individual life policy issued without evidence of insurability, if application is made within what time period after termination? a) 31 days b) 45 days c) 1 year d) 10 days
b) 45 days New York law grants individuals whose group policies cease because of termination of employment or membership the right, if application is made and premium paid within 45 days, to request an individual policy on any form customarily issued by the insurer at the age and in the amount applied for without evidence of insurability.
Regarding the COB provision, how can the order of payment be determined? a) Unilateral rule b) Birthday rule c) Contact rule d) Continuation rule
b) Birthday rule (Coordination of Benefits) If both parents name their children as dependents under their group policies, then the order of payment will usually be determined in one of two ways depending on the applicable state law. Under the gender rule, the father's coverage is always considered primary. Under the birthday rule, the coverage of the parent whose birthday is earliest in the year will be considered primary.
What option allows the insured to periodically increase benefit levels without providing evidence of insurability? a) Level premium b) Guarantee of insurability c) Guarantee renewable d) Annual increase
b) Guarantee of insurability Guarantee of insurability option allows the insured to periodically increase benefit levels without providing evidence of insurability. The amount is usually limited to allowing a 5% compounded annual increase.
The Patient Protection and Affordable Care Act includes all of the following provisions EXCEPT a) Coverage for preventive benefits. b) Individual tax deduction for premiums paid. c) Right to appeal. d) No lifetime dollar limits.
b) Individual tax deduction for premiums paid. The Act does not offer tax deductions for health insurance premiums. All the other provisions are included in the Act.
A prospective deferred annuity owner is concerned about what would happen if he surrendered the annuity before the annuitization period. The agent most likely explained which of the following? a) It is not possible to surrender an annuity before the annuitization period. b) Nonforfeiture option guarantees that the owner will receive a surrender value of the contract. c) The owner will receive some of the money back, which will depend on the surrender value established by the insurer at the time that the contract is terminated. d) The insurance company will apply the money to another annuity or a life insurance policy, but the money cannot be returned.
b) Nonforfeiture option guarantees that the owner will receive a surrender value of the contract. If a deferred annuity is surrendered prior to annuitization, the surrender value of the annuity is guaranteed (e.g. 100% of the premium paid, less any prior withdrawals and related surrender charges) due to the nonforfeiture provision.
While you are reviewing Patrick's employer's contributions to his Health Savings Account with him, he asks you how the contributions affect his taxes. You should advise him that HSA contributions are a) Excluded from corporate tax calculations. b) Not included in the individual taxable income. c) Taxed at the same rate as the Social Security tax rate. d) Taxed at the personal income tax rate.
b) Not included in the individual taxable income. HSA contributions made by an employer are not included in the determination of an individual's taxable income.
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? a) Joint and survivor b) Pure life c) Life with guaranteed minimum d) Installment refund
b) Pure life A Pure Life Annuity has the potential for providing the maximum income per dollar of premium if the annuitant lives beyond their life expectancy. However, if the annuitant dies before his or her life expectancy, and before the total benefit has been paid out, payments cease and there is no refund of payments to survivors.
Janie is on bed rest for a brain injury. She is finally released to return to some of her normal activities but is only allowed to work on a part-time basis. Which of the following could help Janie recover the portion of income lost by working only part-time? a) Recovering Worker's Compensation b) Residual Disability Benefit c) Income Compensation d) Disability Income Differential
b) Residual Disability Benefit A Residual Policy Benefit is written for those individuals who are returning to work after a period of disability but are only able to work on a part-time basis. The benefit compensates the insured for the amount of monthly income lost by the reduced number of working hours. For instance, if Janie earns $2500 per month but, because of her reduced hours, only earns $1500 per month, she will receive a $1000 benefit payment.
Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated? a) Those who have no history of claims b) Those who have been insured under the plan for at least 5 years c) Those who have worked in the company for at least 3 years d) Those who have dependents
b) Those who have been insured under the plan for at least 5 years If the master contract is terminated, every individual who has been on the plan for at least 5 years will be allowed to convert to individual insurance of the same coverage.
which of the folloing 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? a. warrenty b. aleatory c. adhesion d. subrogation
b. aleatory
Earl borrowed money at the bank to send his daughter to college. Instead of purchasing Credit Life insurance, he used an existing life insurance policy to secure the debt. This would be called a a. assignment of ownership b. collateral assignment c. temporary assignment d. change of beneficiary
b. collateral assignment-transferring all or a part of the death benefit to another
What is the elimination period for Social Security disability benefits? a) 12 months b) 3 months c) 5 months d) 6 months
c) 5 months The elimination period for Social Security disability benefits is 5 months.
When a reduced-paid up non-forfeiture option is chosen, what happens to the face amount of the policy? a. it decreases over the term of the policy b. it remains the same as the original policy, regardless of any discrepancies in value c. it is reduced to the amount of what the cash value would buy as a single premium d. it is increased when extra premiums are paid
c. it is reduced to the amount of what the cash value would buy as a single premium- In a reduced paid-up policy, the original policy's cash value is used as single premium to pay for a permanent policy with a reduced face amount from the original, hence the name. The new policy accumulates in cash value until its maturity or the insured's death
At what point must an Outline of Coverage be delivered? a) At any point up to 30 days after policy delivery b) At the time of application only c) Upon delivery of the policy only d) At the time of application or upon delivery of the policy
d) At the time of application or upon delivery of the policy An Outline of Coverage must be delivered at the time of application or upon delivery of the policy.
A pre-existing condition is one a) Which occurs during the waiting period. b) That must be covered in a health policy. c) That is excluded for 24 months. d) For which the insured has been treated in the past.
d) For which the insured has been treated in the past. Pre-existing conditions are defined as conditions for which the insured has received diagnosis, advice, care, or treatment during a specific time period prior to the application. Time periods vary from state to state, company to company, and plan to plan.
Bethany studies in England for a semester. While she is there, she is involved in a train accident that leaves her disabled. If Bethany owns a general disability policy, what will be the extent of benefits that she receives? a) Full b) 50% c) 25% d) None
d) None General disability policies do not cover losses caused by war, military service, intentionally self-inflicted injuries, overseas residence, or injuries suffered while committing or attempting to commit a felony.
The insurance company underwriter could find information concerning the personal activities and character of an applicant from which of the following reports? a. attending physician b. insurance company who provided the prior coverage c. Medical Information Bureau d. agent's report
d. agent's report- the agent communicates his/her observations concerning an applicant in the agent's report
Which of the following applicants could the insurer charge a higher rate and not be charge with unfair discrimination? a. an applicant that was born in another country b. an applicant who is legally blind c. an applicant who has been a victim of domestic abuse d. an applicant that smokes cigarettes as opposed to one that does not
d. an applicant that smokes cigarettes as opposed to one that does not
Who can make changes to the policy once it is in effect? a. the insured b. the policyowner c. the agent d. an executive officer of the insurer
d. an executive officer of the insurer- any changes made to policy must be endorsed and attached to the policy over the signature of an authorized officer of that insurer. No other individual has the authority to make changes or waive policy provisions.
Which is the primary source of information used for insurance underwriting? a. applicant interview b. medical records c. private investigations d. application
d. application
Who is the owner of the policy and who pays the premium in and Executive Bonus plan? a. company is the owner, but the executive pays the premium b. board of directors is the owner, and the board of directors pays the premium c. company is the owner, and the company pays the premium d. executive is the owner, and the executive pays the premium
d. executive is the owner, and the executive pays the premium- the employer reimburses the executive for cost (or pays a bonus in the amount of the premium). Since the executive is receiving compensation, the amount paid by the employer would be considered taxable income.
The factor added to the net premium to cover the costs of the insurer in obtaining and maintaining the business is called: a. legal reserve b. dividend accumulation c. premium tax d. expenses
d. expenses- loading is another term for expenses. Net premium (mortality minus interest earned) plus expenses (or loading) equal the gross premium
Which of the following statements best describes the effect the Accelerated benefit provision would have on the benefits paid to the beneficiary? a. it will not affect the benefits paid to the beneficiary b. it will reduce the benefits by 70% c. it will increase the benefits paid to the beneficiary d. it will decrease the benefits paid to the beneficiary
d. it will decrease the benefits paid to the beneficiary-The Accelerated Benefit provision allows the early payment of some portion of the death benefit if the insured becomes terminally ill or is confined to a long-term care facility. The face amount of the insurance is therefore reduced, with will decrease the benefits paid to the beneficiary.
Two equal partners in a business worth $150,000 are using a Cross Purchase plan to protect against the death of each other. Which of the following statements would be correct? a. partner B buys a policy on partner A in the amount of $75,000 naming Partner A as beneficiary. b. partner A buys a policy on partner B in the amount of $150,000 naming Partner A as beneficiary. c. partner B buys a policy on partner A in the amount of $150,000 naming Partner A as beneficiary. d. partner A buys a policy on partner B in the amount of $75,000 naming Partner A as beneficiary.
d. partner A buys a policy on partner B in the amount of $75,000 naming Partner A as beneficiary.
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? 1. $20,000 2. $25,000 3. $50,000 4. the face amount will be determined by the insurer
$50,000
Three factors that determine insurable interest
1. insuring one's own life 2. insuring the life of a family member 3. insuring the life of a business partner, employee, or someone who has a financial obligation to them
the minimum number of credits required for partially insured status for social security disability benefits is 1. 4 credits 2. 6 credits 3. 10 credits 4. 40 credits
6 credits
a
A 37-year-old owns a policy with a Guaranteed Insurability Rider. The policyowner would like to increase the benefit amount offered by the policy. What documentation will be required? a. no documentation b. proof of insurability
In long term care (LTC) policies, as the benefit period lengthens, the premium a) Remains unchanged b) LTC premium are not based on benefit periods c) Decreased d) Increases
Answer: D
If $100,000 of life insurance proceeds were used in a settlement option, which paid $13,000 per year for 10 years which of the following would be taxable annually? a) $3,000 b) $13,000 c) $10,000 d) $7,000
Answer: A
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? a) As of the application date b) As of the policy delivery date c) As of the first of the month after the policy issue d) As of the policy issue date
Answer: A
The provision which states that both the printed contract and a copy of the application for the contract between the policy owner and the insurer is called the: a) Entire contract b) Total contract c) Aleatory contract d) Complete contract
Answer: A
When risks with higher probability of loss are seeking insurance more often than other risks, this is known as what?
Adverse selection
a
All of the following are true regarding insurance policy loans EXCEPT a. Policy loan can be made on policies that do not accumulate cash value. b. The policy will terminate if the loan plus interest equals or exceeds the cash value of the policy.
b
All of the following statements about Medicare supplement insurance policies are correct EXCEPT a.Medigap policies supplement Medicare benefits. b.Medigap policies cover the cost of extended nursing home care.
a
All of the following statements concerning dividends are true EXCEPT a. Dividend amounts are guaranteed in the policy. b. They stem from favorable underwriting experience.
b
An insured has a major medical policy with a $500 deductible and a coinsurance clause of 80/20. If he incurs medical expenses of $4,000, the insurer would pay a. $3,200. b. $2800
b
An insured has mistakenly failed to enroll in her husband's health plan. What would happen following a major health expense? a. Her insurance would become primary, and her husband's secondary b. Her insurance would pay up to its limit
a
An insured purchased an insurance policy 5 years ago. Last year she received a dividend check from the insurance company which 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? a. Mutual b. Reciprocal
b
Andy and Amy, both 53 years of age, are married. Amy is covered under Andy's family health insurance plan at work. If Andy dies unexpectedly, which of the following is true regarding Amy's health coverage? a. The group coverage will terminate 90 days after Andy's death. Amy will now have to buy an individual policy and provide evidence of insurability. b. Amy will be given the option to continue her coverage under the group plan, but will have to pay premiums for her coverage.
Alden is involved in a small plan accident that renders him permanently deaf, although he does not sustain any other major injuries. Alden is still able to perform his current job. To what extent will he receive Presumptive Disability benefits? a) Full benefits b) Partial benefits c) Full benefits for 2 years d) No benefits
Answer: A
All of the following are differences between individual and group health insurance EXCEPT a) Individual insurance does not require medical examinations, while group insurance does require medical examinations b) In individual policies, the individual selects coverage options, while in a group plan all employees are covered for the same coverage which is chosen by the employer c) Individual coverage can be written on an occupational or nonoccupational basis while group plans cover only nonoccupational d) Individual policies are renewable at the option of the insured, while group usually terminates when the individual leaves the group
Answer: A
All of the following are true regarding insurance policy loans EXCEPT a) Policy loan can be made on policies that do not accumulate cash value b) The amount of unrepaid loan and interest will be deducted from the policy proceeds when the insured dies c) The policy will terminate if the loan plus interest equals or exceeds the cash value of the policy d) Policyowners can borrow up to the full amount of their whole life policy's cash value
Answer: A
An insured has medical insurance coverage through two different providers, both covering the same expenses on an expense incurred basis. Neither company knows in advance that the insured has coverage through any other insurers. The insured submits a claim to both insurers. How should the claim be handled? a) Each insurer should pay a proportionate share of the claim b) One of the insurers will pay fully, while the other will not pay any benefits c) Once the insurers discover the duplicate coverage, the policies would most likely be cancelled, and no claim paid. d) The insured should receive full benefits from each insurer
Answer: A
Concerning Medicare Part B, which statement is INCORRECT? a) Medicare Part B is fully funded by Social Security taxes (FICA) b) If a person initially declines Part B, he or she must wait until the next general enrollment period to enroll c) An individual must reject Medicare Part B or he will be enrolled in it automatically d) Medicare part B provides partial coverage and benefits for medical expenses not covered completely by Part A
Answer: A
Following an injury, Jill, age 66 and covered under Medicare parts A&B was treated by her physician on an out-patient basis. How much of her doctors bill will Jill be required to pay out-of-pocket? a) 20% of covered charges above the deductible b) 80% of covered charges above the deductible c) All reasonable charges above the deductible according to Medicare standards d) A per office call deductible
Answer: A
All of the following statements are Medicare supplement insurance policies are correct EXCEPT a) Medigap policies cover the cost of extended nursing home care b) Medigap policies cover Medicare deductibles and copayments c) Medigap policies supplement Medicare payments d) Medigap policies are issued by private insurers
Answer: A Medigap policies do not cover the cost of extended nursing home care. Medigap plans are designed to fill the gap in coverage attributable to Medicare's deductibles, copayment requirements, and benefit periods. These plans are issued by private insurance companies
Which of the following statements is correct concerning taxation of a long-term care insurance? a) Excessive benefits may be taxable b) Benefits may be taxable as ordinary income c) Premiums may be taxable as income d) Premiums are not deductible in any case
Answer: A Regardless of whether or not the insured can deduct individual long-term care premiums, the benefits are received income tax free by the individual. Excessive benefits as determined by statute are taxable as ordinary income
After 3 years of making payments into a flexible premium deferred annuity, the owner decides to surrender the annuity. The insurer returns all the premium payments to the owner, except for a predetermined percentage. What is this percentage called? a) Inflation adjustment b) Surrender charge c) Termination penalty d) Bail out charge
Answer: B
All of the following qualify for Medicare Part A EXCEPT: a) Anyone who is over 65, not covered by Social Security, and is willing to pay premium b) Anyone who is willing to pay a premium c) Anyone that qualifies through social security d) Anyone who is at the end stage renal disease
Answer: B
An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible? a) The insured can transfer the policy to his friend and then notify the insurer of the change b) The insured will need a written consent of the insurer c) It is impossible to transfer a policy d) The insured would have to surrender his policy to the insurer, and his friend could then ask to buy it
Answer: B
Another name for a substandard risk classification is: a) Elevated b) Rated c) Controlled d) Declined
Answer: B
Attempting to determine how much insurance an individual would require based upon their financial objectives is know as: a) Viatical Approach b) Needs approach c) Human life approach d) Estate planning
Answer: B
For an individual who is NOT covered by an employer-sponsored plan, IRA contributions a) Are partially tax deductible depending on the income level b) Will be tax deductible c) Will be deducted based on the income level d) Are never tax deductible
Answer: B
Lyle has $10,000 term life policy. He paid his annual premium on Feb 1. Lyle fails to renew the policy and dies on Feb 28 of the following year. Accounting for the $200 of earned premium, how much will the beneficiary receive from Lyle's insurance company? a) $10,000 b) $9,800 c) $200 d) $0
Answer: B
The 3 main differences between fixed and variable annuities include all of the following EXCEPT: a) License requirements b) Mortality c) Interest Rate d) Underlying Investment
Answer: B
Under a pure life annuity, an income is payable by the company a) For as long as either the annuitant or a name beneficiary is alive b) Only for the life of the annuitant c) Until the principal and interest are exhausted d) For a guaranteed period of time whether or not the annuitant survives to the end of that period
Answer: B
What is the purpose of COBRA? a) To protect the insured against insolvent insured b) To provide continuation of coverage for terminated employees c) To provide coverage for the dependents d) To provide health coverage for people with low income
Answer: B
Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost? a) Reasonable coverage expectations b) Indemnity c) Stop-loss d) Limited benfits
Answer: B
Which of the following could be considered an employee's dependant under employer group health insurance? a) A 21 year old child who is a part time student b) A 35 year old disabled child incapable of self support c) A 24 year old step child d) A 20 year old married child
Answer: B
Which of the following is NOT the purpose of HIPAA? a) To limit exclusions for preexisting conditions b) To provide immediate coverage to new employees who had been previously covered for 18 months c) To guarantee the right to buy individual policies to eligible individuals d) To prohibit discrimination against employees based on their health status
Answer: B
Which of the following is true regarding underwriting for a person with HIV? a) A person may be declined for HIV but not AIDS. b) The person may be declined c) The person may only be declined if he/she has symptoms d) The person may not be declined
Answer: B
Who is involved in completing the agent's report? a) Attending physician and the agent b) Only the agent c) The agent and the applicant d) Only the underwriter, if not agent
Answer: B
Your client is planning to retire. She has accumulated $100,000 in 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: a) Joint and survivor b) Straight life c) Life income with period certain d) Installment refund
Answer: B
How are funds contributed to a tax-sheltered annuity treated for taxation? a) The contributions are taxed as income for the employee b) The contributions are not included as income for the employee, but are taxable upon distribution c) The contributions are never taxed d) The contributions are taxed as income for the employees
Answer: B Funds contributed are excluded from the employee's current taxable income, but are taxable upon withdrawal
If an individual is covered under a disability income policy that includes an Accidental Death and Dismemberment rider, what are the maximum benefits that he will receive from the policy, if he loses sight in both eyes as a result of a fire? a) Reciprocal amount b) Capital sum c) Percentage of full amount d) Principal sum
Answer: D
All of the following statements concerning Waiver of Premium riders are correct EXCEPT: a) Once activated, the Waiver of Premium will continue until the insured's recovery or the maturity of the policy whatever occurs first b) An insured who has recovered from a disabling injury will be required to repay the insurer for any premiums that were waived c) Waiver of Premium riders require that disablement needs to last for a certain period of time d) There is a maximum age limit for the Waiver of Premium rider to activate.
Answer: B Premiums which are waived under the rider do not require repayment upon the insured's recovery
In a group policy, who is issued a certificate of insurance? a) The insurance company b) The employer c) The individual insured d) The healthcare provider
Answer: C
Pete is hospitalized with a back injury. Upon checking his disability income policy, he learns that he will not be eligible for benefits for at least 30 days. This would indicate that his policy was probably written with a 30 day: a) Probationary period b) Deductible c) Elimination period d) Black-out period
Answer: C
What makes up the Medical Information Bureau? a) Former insured b) Physicians and paramedics c) Insurers d) Hospitals
Answer: C
Which of the following can surrender a deferred annuity contract? a) The beneficiary after the owner's death b) Deferred annuity cannot be surrendered c) Only the annuity owner d) Only the insurance company for nonpayment of premiums
Answer: C
Which of the following is NOT a feature of a guaranteed renewable provision? a) Coverage is not renewable beyond the insured's age 65 b) The insured's benefits cannot be reduced c) The insurer can increase the policy premium on an individual basis d) The insured has a unilateral right to renew the policy for the life of the contract
Answer: C
Which of the following is true regarding dividend-related taxation? a) Dividends are taxable in some life insurance policies and nontaxable in others b) Dividends are considered income for tax purposes c) Dividends are not taxable d) Dividends are taxable only after a certain amount is accumulated annually
Answer: C
An insurance company assures its new policyholders that their premium costs will not increase for a period of at least five years. However, due to increasing financial strain, they plan to raise premium costs of all insureds by 10% over the next 2 years. What term best describes this act? a) Unfair discrimination b) Errors and omission c) Fraud d) Defamation
Answer: C According to Title 18, Sections 1033 and 1034 of the US code, any oral or written statement by any person engaged in the business of insurance that are false or any omissions of material fact are considered unlawful insurance fraud. This includes statements made on an application for insurance, renewal of a policy, claims for payment or benefits, premiums, paid, and financial condition of an insurer
Joe Schmoe thinks it would be a good idea to use an assumed business name for his insurance business, instead of his legal name. What must he do before he can do business under the name of Joe Insurakon? a) Joe must notify the Commissioner, but can begin using the assumed name for business immediately. b) Joe cannot use an assumed name for business c) Joe musty notify and get approval from the Commissioner d) Joe must legally change his name to Joe Insurakon
Answer: C An insurance producer doing business under any name other than the producer's legal name is required to notify and obtain approval from the commissioner prior to using the assumed name.
Which of the following health care plans would most likely provide the insurer/subscriber with comprehensive health care coverage? a) Medical-surgical expense plan b) Basic medical expense plan c) Health Maintenance Organization plan d) Group dental insurance plan
Answer: C HMO's provide a package of comprehensive health care services that include routine physicals, immunizations, well baby care, family planning, etc. as well as the treatment of sickness and injury
For an individual who is NOT covered by an employee-sponsored plan. IRA contributions: a) Are never tax deductible b) Are partially tax deductible depending on the income level c) Will be tax deductible d) Will be deducted based on the income level
Answer: C 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 is an example of a limited-pay life policy? a) Level Term Life b) Striaght Life c) Life Paid-up at Age 65 d) Renewable Term to Age 70
Answer: C Limited pay whole life premiums are all paid by the time the insured reaches Age 65. The policy endows when the insured turns 100. It is the premium paying period that is limited, not the maturity
If the agent fails to obtain an applicant's signature on the application, the agent must: a) Sign the application, stating it was by the agent b) Send the application to the insurer with a note explaining the absence of the signature c) Return the application for a signature d) Sign the application for the applicant.
Answer: C All applications must have the appropriate authorized signature
Who must a business entity designate as being responsible for its compliance with insurance laws? a) Anyone b) An employee approved by the commissioner c) A licensed producer d) A lawyer
Answer: C The business entity must have designated a licensed producer as responsible for the business entity's compliance with the insurance laws, rules, and regulations of New Hampshire.
All of the following benefits are available under Social Security EXCEPT: a) Old-age and retirement benefits b) Disability benefits c) Death benefits d) Welfare benefits
Answer: D
An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his: a) Experience rating b) Group rate c) Insurer's scheduled rate d) Attained age
Answer: D
How many hours of continuing education are required of insurance producers? a) 180 hours b) 15 hours c) 30 hours d) 24 hours
Answer: D
If a policy has an automatic premium loan provision, what happens if the policyowner dies before the loan is paid back? a) The balance of the loan is forgiven; the policy beneficiary receives the full death benefit b) The policy beneficiary takes over the loan payment c) The policy is rendered null and void d) The balance of the loan will be taken out of the death benefit
Answer: D
Molly is the owner of a $225,000 life policy with a triple indemnity rider for accidental death. When Molly is killed in a car accident, It is determined that the accident was his fault and that he was intoxicated at the time of the accident. The triple indemnity rider in Molly's policy specifies that the death must not be contributed to by the insured in any manner. In this case, the beneficiary will receive: a) $675,000 (triple the amount of policy value) b) $0 c) $112,500 (50% of the policy value) d) $225,000
Answer: D
Regarding a PPO, which of the following is correct when selecting a primary care physician? a) The insured may choose medical providers not found on the preferred list and still retain coverage b) The insured is allowed to receive care from any provider, but if the insured select a PPO provider, the insured will realize lower out of pocket costs c) If a non-network provider is used, the insured's out-of-pocket costs will be higher d) All of the above are true
Answer: D
Social security benefits are available for a surviving spouse until the youngest child reaches age 16. Benefits are later resumed when the surviving spouse reaches retirement age. What is the time period called during which the surviving spouse does not receive benefits? a) Waiver of premium b) Retention of capital c) No-benefit d) Blackout period
Answer: D
Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a benficiery, the premiums must be paid: a) Until the policyowner's age is 65 b) For 20 years c) Until the policyowner's age is 100, when the policy matures d) For 20 years or until death whichever occurs first
Answer: D
Under a straight life annuity, if the annuitant dies before the principal amount is paid out, the beneficiary will receive: a) Guaranteed minimum benefit b) The amount paid into the annuity c) The remainder of the principal d) Nothing; the payments will cease
Answer: D
Unlike the dividend itself, the interest earned on dividends is: a) Nontaxable b) Tax deductible c) 40% taxable, similar to a capital gain d) Taxable
Answer: D
What is reinsurance? a) An agreement between originating insurer and ceding insurer b) An agreement between a domestic insurer and a foreign insurer c) An agreement between an insurer and an insured d) An agreement between a ceding insurer and assuming insurer
Answer: D
What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military? a) Limited b) Aviation c) Hazardous occupation d) Military service or war
Answer: D
Which of the following is a similarity between equity indexed annuities and fixed annuities? a) The insurance company keeps 2% of the returns b) Both are considered to be more risky than variable annuities c) They invest on a conservative basis d) They have a guaranteed minimum interest rate
Answer: D
Which of the following would NOT be used in preventative care? a) Pap smear b) Annual physical exam c) Mammogram d) Chemotherapy
Answer: D
Waiter purchased a 15-year level term life insurance policy with a face amount of 100,000. The policy contained an accidental death rider, offering a double indemnity benefit. Waiter was severely injured in an auto accident, and after 10 weeks of hospitalization, he died from the injuries. What amount would his beneficiary receive as a settlement? a) 100,000 plus the total of paid premiums b) 0 c) 100,000 d) 200,000
Answer: D The beneficiary would most likely receive twice the face value of the policy since his fatal injuries were caused by an accident and he died within the 90 day benefit limit stipulated in most policies.
An insured was involved in an accident and could not perform her current job for 3 years. If the insured could reasonably perform another job utilizing similar skills after 1 month, for how long would she be receiving benefits under an "own occupation" disability plan? a) 1 month b) She would not receive any benefits c) 3 years d) 2 years
Answer: D Under an Own Occupation plan, if the insured cannot perform his/her current job for a period of up to 2 years, disability benefits will be issued, even if the insured would be capable of performing a similar job during that 2 year period. After that if the insured is capable of performing another job utilizing similar skills, benefits will not be paid.
what must an alien insurer obtain in order to transact insurance within a given state?
Certificate of authority- all insurers, wheter alien, foreign, or domestic, must obtain before transacting insurance within a given state
a 403(b) plan, commonly referred to as a TSA, is available to be used by 1. postal employees 2. self-employed persons 3. teachers and not-for-profit organizations 4. government workers
teachers and not-for-profit organizations
b
Disability income policies can provide coverage for a loss of income when returning to work only part-time after recovering from total disability. What is the benefit that is based on the insured's loss of earnings after recovery from a disability? a. Partial disability b. residual disability
the authority granted to an agent through the agent's contract is referred to as:
Express authority: express powers are written into the contract between the insurer and the agent
b
How soon following the occurrence of a covered loss, or after the insurer becomes liable for periodic payments for income benefits, must an insured submit written proof of such loss to the insurance company? a. within 20 days b. Within 90 days or as soon as reasonably possible but not to exceed one year.
A projection of insurance needs that is based upon the capitalization of a applicant's future earnings is:
Human life value approach- is determined by the loss of income that would result with the death of the insured, after making adjustments for expenses, inflation, etc.
an insured purchased an insurance policy 5 years ago. last year she received a dividend check from the insurance company which 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 policy owners in the form of a dividend. if all funds are paid out, no dividends are paid.
a
Leo is receiving hospice care. His insurer will pay for painkillers but not for an operation to reduce the size of a tumor. What term best fits this arrangement? a. cost-containment b. limited coverage
b
Medicaid provides all of the following benefits EXCEPT a. Family planning services. b. Income assistance for work-related injury.
the type of insurance company organized to return any surplus money to its policyholders is known as what?
Mutual Company
Which government program allows a blackout period?
Social Security
What are the three ratings of classification that denotes the risk level of insureds?
Standard, substandard, and preferred
The insurer organized to return a profit to the stockholder is what type of insurer?
Stock company
What law protects consumers from the circulation of inaccurate or obsolete information?
The Fair Credit Reporting Act
b
The Patient Protection and Affordable Care Act includes all of the following provisions EXCEPT a. no lifetime dollar limits b. individual tax deduction for premiums paid
If an applicant does not receive his or her insurance policy, who would be held responsible?
The agent
D. Insurer While acting under the authority of the contract given by the insurer, the acts of an agent/producer are considered to be the acts of the insuer.
When agents are acting within the scope of their contract, their actions will be assumed to be acts of the A. Policy owner B. Department of Insurance C. Insured D. Insurer
b
The policyowner of an Adjustable Life policy can increase premium payments and a. have a higher cash value interest rate b. have a limited pay policy
a
The relation of earnings to insurance provision allows the insurance company to limit the insured's benefits to his/her average income over what period of time? a. 2 years b. 1 year
What is the purpose of the buyer's guide?
To allow the consumer to compare the costs of different policies
b
When benefits are paid directly to the insured under a health insurance policy, the policy provides benefits on what type of basis? a.Scheduled b. Reimbursement
An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin?
When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health
b
Which nonforfeiture option provides coverage for the longest period of time? a.Paid-up option b. reduced paid-up
b
Which of the following factors is NOT considered by an underwriter when determining the premium rates for an individual seeking insurance? a. medical history b. race
b
Under a health insurance policy, benefits, other than death benefits, that have not otherwise been assigned, will be paid to a. Beneficiary of the death benefit b. the insured
a
Under the Physical Exam and Autopsy provision, how many times can an insurer have the insured examined, at its own expense, while a claim is pending? a. unlimited b. 1 examination per week of the claim processing period
What is the name of the process that insurance companies use to determine whether or not an applicant is insurable?
Underwriting
a
What is the special significance of a conditional receipt? a. it is intendd to provide coverage on a date earlier than the date of the issuance of the policy b. it guarantees the applicant that the policy will be issued in the amount applied for in the applcation
b
What provision in a life insurance policy would allow the insurer, after the death of the insured, to pay benefits to a person not named in the policy as beneficiary? a. Nonforfeiture clause b. facility of payment clause
b
What type of insurance would be used for a Return of Premium rider? a. annually renewable term b. increasing term
b
When Ken purchased his health policy he was a window washer. He has since changed occupations and now manages a library. Upon notifying the insurer of his change of occupation, the insurer should a. Adjust the benefit in accordance with the decreased risk. b. cosider decreasing the premium
a
When a replacement is involved, a replacing insurance company is responsible for all of the following EXCEPT a. Provide a copy of the Important Notice Regarding Replacement of Life Insurance to the applicant. b. Send the existing insurance company a written notice of replacement
A. The aggent should change an incorrect stament on the application by personally initialing next to the correct statement
Which of the following is INCORRECT regarding the agents duties and responsibilities at the time of the application. A. The aggent should change an incorrect statement on the application by personally initialing next to the correct statement B. the agent should explain the nature and type of any receipt he/she is giving to the applicant. C. The applicant should make sure there are no unanswered questions on the application. Any changes to information on an application must be initialed by the applicant.
a
Which of the following is NOT a way to determine the interest rate in a Universal Life Policy? a. Estimate market conditions for the life of the policy b. Tie current interest rates to Treasury Bills
a
Which of the following is NOT the consideration in a policy? a. application given to a prospective insured b. something of value exchanged between parties
a
Which of the following is NOT true regarding the accumulation period of an annuity? a. It would not occur in a deferred annuity. b. It is the period during which the annuity payments earn interest.
a
Which of the following is NOT true regarding uniform mandatory provisions concerning claims? a. An insured must notify the insurer of a claim on forms prescribed by the insurer. b. If the insured is several days late in filing proof of loss form, the claim cannot be denied if the insured can show good cause.
b
Which of the following is an example of an agent's fiduciary responsibilities? a. Performing a review of the agent's client's coverage b. Promptly forwarding premiums to the insurance company
b
Which of the following is the best reason to purchase life insurance rather than annuities? a. To liquidate a sum of money over a lifetime b. To create an estate
b
Which of the following is true regarding inpatient hospital care for HMO members? a. Inpatient hospital care is not part of HMO services. b.Care can be provided outside of the service area.
a
Which of the following products requires a securities license? a.Variable annuity b.Fixed annuity
a
Which of the following statements is NOT true concerning Medicaid? a.It consists of 3 parts: Part A: hospitalization, Part B: doctor's services, Part C: disability income. b. its a state program
a
Which of the following statements is not true of a Combination Dental Plan? a. A combination plan is also known as the "Superimposed Plan". b. The combination plan covers diagnostic and preventive care on the usual, customary, and reasonable basis.
a
Which option allows the insurer to retain policy proceeds and pay interest on the proceeds to the beneficiary at regular intervals, with guaranteed interest rates? a. Interest Only b. Fixed Interval
b
With the cash refund option, when the annuitant dies, what would the beneficiary receive? a. Cash refund of the amount paid into the annuity b. The refund of the original amount minus payments already made
Which of the following is NOT true? a. the Life and Health Guaranty Association is comprised of representatives from the DOIs of every state b. the Association's liability is generally limited to that of the impaired instance company c. the Life and Health Guaranty Association's maximum coverage is $500,000 d. the Life and Health Guaranty Association was created to protect policy owners financially if their insurers become insolvent
a. the Life and Health Guaranty Association is comprised of representatives from the DOIs of every state-any company selling life and/or health insurance must belong to the Guaranty Association, not the DOI representatives
C. Premiums
all of the following are examples of risk retention EXCEPT? A. co-payments B. Self-insurance C. Premiums D. deductibles
who can make a fully deductible contribution to a traditional IRA? 1. a person whose contributions are funded by a return on investment 2. an individual not covered by an employer-sponsored plan who has earned income 3. anybody: all IRA contributions are fully deductible regardless of income level 4. someone making contributions to an educational IRA
an individual not covered by an employer-sponsored plan who has earned income
B. if the primary beneficiary predeceases the insured
an individual purchased a life insurance policy on his life naming his wife is primary beneficiary, and their daughter as contingent beneficiary. under what circumstance could the daughter collect the death benefit. A. if the insured dies from an accident B. if the primary beneficiary predeceases the insured C. the primary and contingent beneficiaries share death benefits equally
D. 3% insurance companies promise guaranteed minimum on the fixed annuities ( 3% in this scenario) this means that if the investments draw less than 3 % the company will have to pay 3 percent anyway. if the investments earn 3 % the company will pay the excess.
an insurance company forwards fixed annuity premium to their general account, where the money is invested. The guaranteed minimum interest is 3%. During an economic downswing the investments only drew 2.5 % what interest rate will the insurance pay to the policy holders. A. 3% this payment. The overpayment this timewill be subtracted from the next time the rate exceeds 3 % B. 3% regardless of what the investment Dr since that's the guaranteed rate C. 2.5% D. 3%
bequests
an insured may wish to leave funds to their church, school, or other organization at the time of their death
B. represent the client an agents license authorizes the licensee to represent the insuer not the client
and insurance agents responsibilities include: all of the following EXCEPT A. perform professionally B. represent the client C. perform faithfully D. represent the insuer
which of the following premium payment modes will incur the lowest overall payment? 1. annual 2. semi-annual 3. quarterly 4. monthly
annual
Life settlements
any financial transaction in which the owner of a life insurance policy sells a policy that is no longer needed to a third party for some form of compensation, usually cash
employer contributions made to qualified plan 1. may discriminate in favor of highly paid employee 2. are after-tax contributions 3. are taxed annually as salary 4. are subject to vesting requirements
are subject to vesting requirements
all of the following are TRUE of the federal tax advantages of a qualified plan EXCEPT 1. funds accumulate on a tax-deferred basis 2. employee and employer contributions are not counted as income to the employee for income tax purposes 3. at distribution, all amounts by the employee are tax free 4. employer contributions are tax deductible as ordinary business expense
at distribution, all amounts received by the employee are tax free
SIMPLE plans require all of the following EXCEPT 1. employees must receive a minimum of $5000 in annual compensation 2. at least 1000 employees 3. no other qualified plan can be used 4. no more than 100 employees
at least 1000 employees
an employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his 1. experience rating 2. group rate 3. insurer's scheduled rate 4. attained age
attained age
which of the following protects insured from an unintentional policy lapse due to a nonpayment of premium? 1. automatic premium loan 2. extended term 3. reinstatement 4. reduced-paid up
automatic premium loan
An employee insured under a group health plan has been paying $25 monthly premium for his group health coverage. The employer has been contributing $75, for the total monthly cost of $100. If the employee leaves the company, what would be his maximum monthly premium for COBRA coverage? a) $100 b) $102 c) $25 d) $25.50
b) $102 The employer is permitted to collect a premium from the terminated employee at a rate of no more than 102% of the individual's group premium rate (in this scenario, 102% of $100 total premium is $102). The 2% charge is to cover the employer's administrative costs.
An insured's long-term care policy is scheduled to pay a fixed amount of coverage of $120 per day. The long-term care facility only charged a $100 per day. How much will the insurance company pay? a) 20% of the total cost b) $120 a day c) $100 a day d) 80% of the total cost
b) $120 a day Most LTC policies will pay the benefit amount in a specific fixed dollar amount per day, regardless of the actual cost of care.
a morale hazard may exist due to: a. tendency toward alcoholism b. indifference to loss c. past fraudulent claims against the insurer d. past medical history
b. indifference to loss-morale hazards arise from a state of mind that causes indifference to loss, such as carelessness
How is the amount of Social Security disability benefits calculated? a) It is based on age, number of quarters worked in the last 20 years (minimum of 60) and the number of health claims made during that period of time. b) It is based upon the worker's Primary Insurance Amount (PIA), which is calculated from their Average Indexed Monthly Earnings over their highest 35 years. c) It is based upon the worker's Primary Insurance Amount (PIA), which is calculated from their Average Indexed Monthly Earnings over their highest 30 years. d) It is based on age, number of quarters worked in the last 25 years (minimum of 80) and the number of health claims made during that period of time.
b) It is based upon the worker's Primary Insurance Amount (PIA), which is calculated from their Average Indexed Monthly Earnings over their highest 35 years. The amount of Social Security disability benefits is based upon the worker's Primary Insurance Amount (PIA), which is calculated from their Average Indexed Monthly Earnings over their highest 35 years. The lowest 5 years of income may be deleted from calculation.
Which statement is NOT true regarding a Straight Life policy? a) It has the lowest annual premium of the three types of Whole Life policies. b) Its premium steadily decreases over time, in response to its growing cash value. c) The face value of the policy is paid to the insured at age 100. d) It usually develops cash value by the end of the third policy year.
b) Its premium steadily decreases over time, in response to its growing cash value. Straight Life policies charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit.
When does Medicare cover nursing home care? a) Medicare covers all nursing home care for eligible policyholders b) Only if it is part of treatment for a covered illness or injury c) Only if the deductible has been met d) Only for those age 80 and older
b) Only if it is part of treatment for a covered illness or injury Medicare will not cover long-term care or nursing home care unless it is part of the treatment for a covered illness or injury.
Who can request changes in premium payments, face value, loans, and policy plans? a) Agent b) Policyowner c) Contingent Beneficiary d) Beneficiary
b) Policyowner Mandatory provisions give these rights to the policyowner.
A life insurance policy does not have a war clause. If the insured is killed during a time of war, what will the beneficiary receive from the policy? a) Nothing, since the insured was killed as a result of a war b) The full death benefit c) The policy's cash value d) A refund of premiums
b) The full death benefit War or Military Service Clause specifically excludes or limits the insurer's liability for losses caused by war or active military service. If a life insurance policy does not have that exclusion, the benefits are paid to the beneficiary, as if the insured died of any other cause.
An insurer has filed a new rate with the Commissioner, and is waiting for a reply. The Commissioner hasn't responded yet. After how many days can the insurer apply the new rate? a. 5 days b. 10 days c. 60 days d. 45 days
b. 10 days- if the rate filed, but is not disapproved within 10 days, the higher rate may be applied.
The following are legitimate uses of insurance in a business setting EXCEPT a. Funding business continuation agreements b. Funding against general company financial loss c. compensating executives d. funding against financial loss caused by the death of a key employee
b. Funding against general company financial loss-both life and health insurance can be used for a variety of purposes in a business setting, including the funding of business continuation agreements, compensating executives, and protecting the firm against financial loss resulting from the death or disability of key empolyees
An insured purchases a policy in 2000 and dies and 2005. The insurance company discovers at the time that the insured concealed information during the application process. What can they do? a. Sue for the right to not pay the death benefit b. Pay the death benefit c. Refuse to pay the death benefit because of the fraud d. Pay a decreased death benefit
b. Pay the death benefit- the incontestability clause prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years, even on the basis of a material misstatement of facts or concealment of a material fact.
an agent is acting ethically in all of the following situations EXCEPT: a. keeping customers' best interests in mind b. always representing the insured c. working within the conditions of his/her contract d. representing the insurer, not the insured
b. always representing the insured-an agent is deemed to represent the insurer, not insured. if an agent is working within the conditions of the contract, the insurance company is fully responsible for his/her actions. however, when making a sale, the agent should keep the customers' best interest in mind
All other factors being equal, the least expensive first-year premium payment is found in a. level term b. annually renewable term c. increasing term d. decreasing term
b. annually renewable term- is the purest form of term insurance. The death benefit remains level, but the premium increases each year with the insured's attained age. decreasing policies-the face amount decreases, the premium is constant level term and increasing term policies- the premium remains level for the term of the policy
Which of the following entities regulates variable life policies? a. the Federal Government only b. Securities and Exchange Commission (SEC) and the Insurance Department c. Financial Industry Regulatory Authority and the State Guarantee Association d. the Insurance Department only
b. b. Securities and Exchange Commission (SEC) and the Insurance Department -Variable life insurance is regualted by bothe the state and federal governments SEC and the Financial Industry Regulatory Authority (FINRA) and the Insurance Department
Which of the following is NOT an example of insurable interest? a. child in parent b. debtor in creditor c. business partners in each other d. employer in employee
b. debtor in creditor- the three recognized areas in insurable interest are as follows: a policy owner insuring his/her own life, the life of a family member, ore the life of a business partner, key employee, ore someone who has a financial obligation to them. A debtor does not have an insurable interest in the creditor.
When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called a. aleatory contract b. executive bonus c. key person d. a fraternal association
b. executive bonus
Which of the following best details the underwriting process for life insurance? a. reporting and rejection of risks b. selection, classification, and rating of risks c. solicitation, negotiation and sale of policies d. issuance of policies
b. selection, classification, and rating of risks-the underwriting process is accomplished by reviewing and evaluation information about an applicant and applying what is known of the individual against the insurer's standards and guidelines for instability and premium rates.
Which of the following are generally not considered when underwriting group insurance? a. the size of the group b. the group's medical history c. the nature of the group d. the group's past claim experience
b. the group's medical history- because it's a group and not written on an individual basis medical questions are not necessary
An insured stops making payments on a loan taken from his cash value policy. What will most likely happen? a. the policy will be reduced to an extended term option. b. the policy will terminate when the loan amount with interest equals or exceeds the cash value c. the insurer will increase the interest rate on the loan and charge a penalty d. the insurer will not permit the policyowner to take out any more loans
b. the policy will terminate when the loan amount with interest equals or exceeds the cash value
Which is generally true regarding insureds who have earned preferred status? a. they keep a higher percentage of any interest earned on their policies b. their premiums are lower c. they can barrow higher amounts off of their policies d. they can decide when to pay their monthly premiums
b. their premiums are lower- the insured is in excellent physical condition and employs healthy lifestyles and habits
The paid-up addition option uses the dividend a. to accumulate additional savings for retirement b. to purchase a smaller amount of the same type of insurance as the original policy c. to purchase a one-year term insurance in the amount of the cash value d. to reduce the next year's premium
b. to purchase a smaller amount of the same type of insurance as the original policy-additional permanent policy
Needs approach
based on the predicted needs of a family after the premature death of the insured. Some factors considered are: income, amount of debt (including mortgage), investments, and other expenses.
all of the following are requirements of eligibility for social security disability income benefits EXCEPT 1. fully insured status 2. waiting period of 5 months 3. being age 65 4. inability to perform any gainful work
being age 65
which of the following would describe a legal document which would dictate who can buy a deceased partner's share of the business and for what amount? 1. split dollar agreement 2. buy-sell agreement 3. profit and loss agreement 4. key person agreement
buy-sell agreement
which of the following statements concerning buy-sell agreements true? 1. buy-sell agreements pay in the event of a medical emergency 2. buy-sell agreements are normally funded with life insurance policy 3. premiums paid are deductible as a business expense 4. benefits received are consider income taxable
buy-sell agreements are normally funded with life insurance policy
Any licensed person who knowingly makes false material statements related to the business of insurance may be fined and imprisoned for up to a) 3 years. b) 5 years. c) 10 years. d) 12 years.
c) 10 years. Anyone engaged in the business of insurance whose activities affect interstate commerce, and who knowingly makes false material statements may be fined, imprisoned for up to 10 years or both. If the activity jeopardized the security of the accompanied insurer, the punishment can be up to 15 years.
When a health insurance policy is purchased in the state of New York, the insured may cancel the policy and receive a premium refund within a) 90 days. b) 10 days. c) 20 days. d) 30 days.
c) 20 days. The Free Look Provision allows for an insured to review his/her policy once it has been delivered; if the insured decides to return it within a certain time period, the premium will be refunded. The Free Look time period varies from state to state. In New York the insured can review the policy from anywhere between 10 and 20 days.
The Omnibus Budget Reconciliation Act of 1990 requires the employer health plan to provide primary coverage for individuals with end-stage renal (kidney) disease before Medicare becomes primary for how many months? a) 36 months b) 12 months c) 30 months d) 24 months
c) 30 months The Omnibus Budget Reconciliation Act of 1990 as amended by the Balanced Budget Act of 1997 requires the employer health plan to provide primary coverage for 30 months for individuals with end-stage renal (kidney) disease before Medicare becomes primary.
Which of the following individuals must pass the written examination to be licensed as an agent? a) A ticket selling airline representative for one-time issuance of baggage or accident insurance. b) An individual seeking to be a representative of a fraternal benefit society as its agent. c) A producer previously licensed in New Jersey who is applying for a New York license 120 days after becoming a resident of this state. d) A licensee who was licensed on July 1, 1987, to represent any assessment corporation.
c) A producer previously licensed in New Jersey who is applying for a New York license 120 days after becoming a resident of this state. Each of the above do not need to take the written examination, except for a previously licensed agent in New Jersey who has allowed more than 90 days to lapse since becoming a resident of New York.
When a person applies for Medicare supplement insurance, whose responsibility is it to confirm that the applicant does not already have accident or sickness insurance already in force? a) Federal government b) Agent c) Insurer d) State government
c) Insurer Although it is illegal for an applicant to intentionally misrepresent himself in an insurance application, it is the insurer's ultimate responsibility to make sure that the applicant does not already have another accident or sickness policy in force.
a producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. this is a personal use of life insurance know as 1. survivor protection 2. life planning 3. survivorship insurance 4. juvenile protection provision
survivor protection
Concerning Medicare Part B, which statement is INCORRECT? a) An individual must reject Medicare Part B or he will be enrolled in it automatically. b) Medicare Part B provides partial coverage and benefits for medical expenses not covered completely by Part A. c) Medicare Part B is fully funded by Social Security taxes (FICA). d) If a person initially declines Part B, he or she must wait until the next general enrollment period to enroll.
c) Medicare Part B is fully funded by Social Security taxes (FICA). Medicare Part B has an annual deductible and copayment by the enrollee.
Which of the following is NOT true regarding Equity Indexed Annuities? a) They have guaranteed minimum interest rates. b) They are less risky than variable annuities. c) They earn lower interest rates than fixed annuities. d) The insurance company keeps a percentage of the returns.
c) They earn lower interest rates than fixed annuities. Equity Indexed Annuities invest on an aggressive basis in order to yield higher returns. Like a fixed annuity, Equity Indexed Annuities have guaranteed minimum interest rates. The insurance company often keeps a predetermined percentage of the return and pays the rest to the annuity owner. Equity Indexed Annuities are less risky than variable annuities and earn higher interest rates than fixed annuities.
If Tom's policy allows him to make periodic additions to the face amount at standard rates, without proving instability, his policy includes a a. Conversion option b. Non forfeiture option c. Guaranteed insurability option d. Guaranteed renewable option
c. Guaranteed insurability option- allows the policyowner to purchase specific amounts of additional insurance at specific dates or events, without providing continued insurability. Rates for the additions are based upon attained age.
an insurer incorporated in which of the following locations would be considered a foreign insurer in Washington D.C.? a. Canada b. Washington D.C. c. Maryland d. Mexico
c. Maryland-foreign is a insurance company that is incorporated in another state or territorial possession. Mexico and Canada are foreign countries, so their insurers will be considered alien. Insurer that is incorporated and operates in Washington D.C. would be considered domestic.
What qualifications must an agent hold in order to sell variable life insurance policies? a. National Association of Insurance Commissioners (NAIC) registration b. state licensing to sell life insurance and variable products c. both state and federal licensing d. same certification as fixed life policies
c. both state and federal licensing-agents selling variable life products must be registered with the Financial Industry Regulatory Authority (FINRA) and must be licensed within the state to sell life insurance and variable products
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? a. key person agreements b. split dollar agreement c. buy-sell agreement d. profit and loss agreement
c. buy-sell agreement
A key person insurance policy can pay for which of the following? a. workers compensation b. hospital bills of the key employee c. costs of training a replacement d. loss of personal income
c. costs of training a replacement- the policy will pay for costs of running the business and replacing the employee
Key person life insurance does NOT reimburse a company for which of the following? a. for a loss of previous business resulting from a key person's death b. for a reduction of profits resulting from a key person's death c. for increased pension liability resulting from a key person's death d. for a loss of leadership resulting from a key person's death
c. for increased pension liability resulting from a key person's death
Amy's insurance premium has decreased slightly, despite the fact that her level of health has remained the same. Which of the following most likely caused the premium decrease? a. she has a Steadily Decreasing Premium policy b. the insurer's customer base is expanding, which allows for lower premiums c. her insurer used interest earned on premiums to lower premium amounts d. her increased age allows for lower premiums
c. her insurer used interest earned on premiums to lower premium amounts
Grace is the primary beneficiary of her grandfather's life insurance policy. Upon his death, she wants some income from the death benefit, but wants the face amount to be conserved. Which settlement option should she choose? a. delayed income option b. fixed amount option c. interest only option d. life income with period certain
c. interest only option- she would receive the interest earned by the face amount, but the face amount would remain
all of the following actions by a person could be described as risk avoidance EXCEPT a. never flying in an airplane b. taking a flu shot each year c. investing in the stock market d. refusing to scuba dive
c. investing in the stock market is not an example of risk avoidance; it creates a possibility of a loss
Which of the following best describes the MIB? a. it's a member organization that protects insured against insolvent insurers. b. it's a rating organization for health insurance c. it's a non profit organization that maintains underwriting information on applicants for life and health insurance d. it's a government agency that collects medical information on the insured from the insurance companies
c. it's a non profit organization that maintains underwriting information on applicants for life and health insurance-Medical Information Bureau (MIB) also maintains confidential medical impairment information on individuals
Which of the following riders provides for a waiver of premium when the policy owner and the insured are NOT the same person? a. waiver of the cost of insurance b. conditions for payment c. payor benefit d. waiver of premium
c. payor benefit- waives the premium of the owner when the owner becomes disable and is a person other than the insured
all of the following are examples of risk retention EXCEPT a. co-payments b. self-insurance c. premiums d. deductibles
c. premiums- retention is a planned assumption of risk, or acceptance of responsibility for the loss by an insured through the use of deductibles, co-payments, or self-insurance
Upon policy delivery, the agent may be required to obtain any of the following EXCEPT a. payment of premium b. corrected and resigned application c. signed waiver of premium d. statement of good health
c. signed waiver of premium
Which of the following statements would best describe the difference between viatical settlements and accelerated death benefits? a. viaticals are determined by morbidity, but Accelerated Death benefits use mortality tables b. viaticals use mortality tables, but Accelerated Death benefits are determined by morbidity c. viaticals are funded by a third party, and Accelerated Death benefits are provided by the insurer that issued the original policy d. viaticals are provided by the insurer that the issued the original policy, and Accelerated Death benefits are funded by a third party.
c. viaticals are funded by a third party, and Accelerated Death benefits are provided by the insurer that issued the original policy-viatical settlements allow someone living with a life threatening condition to sell their existing life insurance policy and use the proceeds when they are most needed, before their death. Viatical settlements are separate contracts in which the insured sells the death benefit to a third party at a discounted rate.
What is the name of the insured who enters into a viatical settlement? a. contingent b. viatical broker c. viator d. third party
c. viator- the owner of a life insurance policy who enters into or seeks to enter into a viatical settlement contract
an insured receives an annual life insurance dividend check. what term best describe this arrangement? 1. accumulation at interest 2. cash option 3. reduction of premium 4. annual dividend provision
cash option
under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner? 1. reduced paid-up 2. paid-up option 3. extended term 4. cash surrender
cash surrender
When a change needs to be made on the application for insurance, which is the best method for correcting the information?
complete a new application or ask the applicant to initial the correction on the original
a key person insurance policy can pay for which of the following? 1. hospital bills of the key employee 2. cost of training a replacement 3. loss of personal income 4. workers compensation
cost of training a replacement
What is the maximum fine for violating the Insurance Code regarding life settlements? a) $2,000 a day b) $10,000 a day c) $50,000 for each settled policy d) $100,000 for each settled policy
d) $100,000 for each settled policy Violating the code in relation to life settlements may result in fines of up to $100,000 for each settled policy.
When a group health insurance plan is terminated, how long is an extension of benefits provided for any totally disabled employee or dependent? a) 18 months b) 3 months c) 6 months d) 12 months
d) 12 months Group insurance plans, which are terminated generally, provide for an extension of benefits to any totally disabled employee or dependent. This extension of benefits is generally provided up to a period of 12 months or until the individual is no longer totally or continuously disabled.
How long must insurers keep records of claims? a) 3 years b) 4 years c) 5 years d) 6 years
d) 6 years Insurers must keep records for at least 6 years or until the filing of a review of the record, whichever is longer.
Mike Armstrong is an agent and wants to operate under the name The Insurance Palace. What kind of license would this require? a) Alias b) Transidentification c) Association d) Agency
d) Agency This state requires an agency license when you are operating under a name other than your own. An example is Ralph Smith and Associates.
An insured's premium increases as a result of her age. Which type of policy does she have? a) Age-Oriented b) Increasing Term c) Age-Based d) Attained Age
d) Attained Age Attained Age policies allow the insurer to increase premiums as the insured ages.
Which of the following is NOT a prerequisite for an insurance license in New York? a) Complete prelicensing education b) File a written application for an insurance license c) Pass the required examination d) Be at least 21 years of age
d) Be at least 21 years of age The Insurance Code states the minimum age for obtaining an insurance license at 18 years.
Mike is still employed at age 60 and wants to know what health insurance coverage he is eligible to receive. Which of the following options are available to Mike? a) Reapplication for group health b) Medicare c) Both group health and Medicare d) Continuation of group health
d) Continuation of group health If a person is still employed at the age of 65, he may choose to either continue group coverage and defer Medicare until retirement, or he may choose to switch to Medicare. The employer cannot provide incentives for switching to Medicare. In this case, Mike is five years too young to qualify for Medicare, so he will have to continue his group health coverage.
Which of the following statements is true regarding LTC insurance? a) Every policy must offer reduced paid-up insurance to the applicant. b) LTC policies may not include any riders. c) LTC policies must allow a 60-day free-look period. d) Every policy must offer nonforfeiture benefits to the applicant.
d) Every policy must offer nonforfeiture benefits to the applicant. Long-term care policies or certificates issued or delivered in this state must offer to the applicant nonforfeiture benefits. Reduced paid-up insurance is one of the possible nonforfeiture options, but it is not necessarily required. LTC policies may contain riders, and must offer a 30-day free-look period.
Who is the owner of the policy and who pays the premium in an Executive Bonus plan? a) Company is the owner, but the executive pays the premium. b) Board of directors is the owner, and the board of directors pays the premium. c) Company is the owner, and the company pays the premium. d) Executive is the owner, and the executive pays the premium.
d) Executive is the owner, and the executive pays the premium. Executive buys the policy and pays the premium, and the employer reimburses the executive for cost (or pays a bonus in the amount of the premium). Since the executive is receiving compensation, the amount paid by the employer would be considered taxable income.
A new employee who meets HIPAA eligibility requirements must be issued health coverage on what basis? a) Noncancellable b) Nondiscriminatory c) Indemnity d) Guaranteed
d) Guaranteed If a new employee is eligible, under HIPAA regulations, the new employer must offer coverage on a guaranteed issue basis.
Who controls changes in premium payments, face value, loans, and policy plans? a) Insurer b) Beneficiary c) Agent d) Policyowner
d) Policyowner Mandatory provisions give these rights to the policyowner.
Which of the following is an example of apparent authority? a) The agent accepts a premium payment during the grace period. b) The agent has business cards and stationery printed. c) The agent puts up a sign with the logo of the insurance company without express permission. d) The agent accepts a premium payment after the end of the grace period An agent who accepts a premium after the end of the grace period appears to the client to have the authority to prevent the policy from lapsing. In fact, the agent has no such power. The power to use business cards, stationery and signage may be either express (written) or implied (not written), but in either case, it is allowed.
d) The agent accepts a premium payment after the end of the grace period An agent who accepts a premium after the end of the grace period appears to the client to have the authority to prevent the policy from lapsing. In fact, the agent has no such power. The power to use business cards, stationery and signage may be either express (written) or implied (not written), but in either case, it is allowed.
What types of services may not be provided under LTC's Assisted Living? a) Linens and personal laundry service b) Assistance with dressing and bathing c) Reminders regarding medication d) Visits by a registered nurse
d) Visits by a registered nurse The following services may be provided: Linens and personal laundry service, assistance with dressing and bathing, reminders regarding medication, assistance with eating. Assisted living offers non-medical assistance.
Can an individual who belongs to a POS plan use an out-of-network physician? a) No b) Yes, but they must use the POS physician first c) Yes, but they must use the HMO physician first d) Yes, and they may use any preferred physician, even if not part of the HMO
d) Yes, and they may use any preferred physician, even if not part of the HMO In a POS plan the individuals can visit an in-network provider at their discretion. If they decide to use an out-of-network physician, they may do so.
An employee will be taxed on the cost of group life insurance paid by the employer if the amount of coverage exceeds a. $10,000 b. $15,000 c. $25,000 d. $50,000
d. $50,000
Replacing insurers are permitted to use electronically completed notice of replacement. However, when this method is used a printed copy of the notice must be sent to the applicant within a. 10 days b. 30 days c. 60 days d. 5 days
d. 5 days
Which of the following is correct concerning the taxation of a Key Person Life Insurance Policy premiums and death benefit? a. Premiums are tax deductible as a business expense and the death benefit is taxable to the company b. Premiums are tax deductible as a business expense and the death benefit is not taxable to the company c. Premiums are not deductible as a business expense and the death benefit is taxable to the company d. Premiums are not deductible as a business expense and the death benefit is not taxable to the company
d. Premiums are not deductible as a business expense and the death benefit is not taxable to the company-The business cannot take a tax deduction for the expense of the premium. However, if the key employee dies, the benefits paid to the business are usually received tax free.
Which of the following statements is NOT true concerning insurable interest as it applies to life insurance? a. business partners have an insurable interest in each other b. a husband or wife has an insurable interest in their spouse c. an individual has an insurable interest in his/her own life d. a debtor has an insurable interest in the life of a lender
d. a debtor has an insurable interest in the life of a lender-but only to the extent of the debt. The debtor does not have an insurable interest in the life of the lender.
What are the members of the Medical Information Bureau required to report? a. any claims an individual has made b. information about unpaid hospital bills c. information about an individual's intentional injuries d. adverse medical information about individuals
d. adverse medical information about individuals-The MIB receives this info from insurance companies so that all the member companies can compare the information they have collected on a potential insured with information other insurers may have discovered.
An agent is acting ethically in all the of following situations EXCEPT a. working within the conditions of his/her contract b. representing the insurer, not the insured c. keeping customers' best interests in mind d. always representing the insured
d. always representing the insured-they are deemed to represent the insurer, not the insured
Which of the following is a generic consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process? a. insurance index b. policy summary c. illustrations d. buyer's guide
d. buyer's guide- a consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process.
All of the following statements concerning dividends are true EXCEPT: a. lower insurance company costs generate higher dividends b. they stem from favorable underwriting experience c. Favorable investment results generate higher dividends d. dividend amounts are guaranteed in the policy
d. dividend amounts are guaranteed in the policy-they cannot be guaranteed
interest earned on policy dividends is 1. tax deductible 2. 40% taxable, similar to capital gain 3. taxable 4. nontaxable
taxable
which authority is NOT stated in an agent's contract but is required for the agent to conduct business?
implied-it exists because not every single detail of an agent's authority can be written in a contract
Courts will interpret any ambiguity in an insurance contract:
in the favor of the insured- insurance policies are contracts of adhesion. the insurer writes the contract and the insured accepts the contract as it is written. when ambiguities exist, courts generally rule in the favor 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 the 1. incontestability clause 2. reinstatement clause 3. insuring clause 4. misstatement of age clause
incontestability clause
Stranger-originated life insurance policies are in direct opposition to the principle of:
insurable interest-because the purchaser of a stranger-oriented life insurance policy doesn't know the insured, ore have any interest in the insured's longevity, STOLI policies violate the principle of insurable interest
debt cancellation
insurance may be used to create a fund to pay off debts of the insured such as home mortgage or auto loans
retirement fund
insurance proceeds may be used as a source of retirement income
emergency reserve funds
insurance proceeds may be used to assist in paying for sudden expenses following the death of the insured
education funds
insurance proceeds may be used to pay for children's education expenses so they can remain in school
when a life insurance was issued, the policyowner designated a primary and a contingent beneficiary. several years later, both the insured and the primary died in the same car accident, and it was impossible to determine who died first. which of the following would receive the death benefit? 1. insured's estate 2. primary beneficiary's estate 3. insured's contingent beneficiary 4. insurance company
insured's contingent beneficiary
which provision of a life insurance policy states the insurer's duty to pay benefits upon the death of the insure, and to whom the benefits will be paid? 1. entire contract clause 2. beneficiary clause 3. consideration clause 4. insuring clause
insuring clause
all of the following are TRUE statements regarding the accumulation at interest option EXCEPT 1. the policyholder has the right to withdraw the accumulation at any time 2. interest credited under this option is not taxable since it remains inside the insurance policy 3. annual dividend is retained by the company 4. interest is credited at a rate specified by the policy
interest credited under this option is not taxable since it remains inside the insurance policy
the policyower 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? 1. fixed amount option 2. interest only option 3. life income with period certain 4. joint and survivor
interest only option
what is the main purpose of the seven-pay test? 1. it guarantees interest minimum 2. it determines if the insurance policy is an MEC 3. it requires level premium payments for 7 years 4. it ensures that the policy benefits are paid out in 7 years
it determines if the insurance policy is an MEC
what is the benefit of choosing extended term as a nonforfeiture option? 1. it can be converted to a fixed annuity 2. it has the highest amount of insurance protection 3. it matures at age 100 4. it allows for coverage to continue beyond maturity date
it has the highest amount of insurance
if an insured surrenders his life insurance policy, which statement is true regarding the cash value of the policy? 1. taxable only if it exceeds the amounts paid for premiums by 50% 2. automatically taxable 3. only taxable if the cash value exceeds the amount paid for premiums 4. not considered to be taxable
it is only taxable if the cash value exceeds the amount paid for premiums
all of the following would be different between qualified and nonqualified retirement plans EXCEPT 1. taxation on accumulation 2. taxation of withdrawals 3. taxations of contributions 4. IRS approval requirements
taxation on accumulation
all of the following are characteristic of group life insurance EXCEPT 1. amount of coverage is determined according to nondiscriminatory rules 2. individuals covered under the policy receive a certificate of insurance 3. certificate holders may convert coverage to an individual policy without evidence of insurability 4. premiums are determined by the age, sex, and occupation of each individual certificate holder
premiums are determined by the age, sex, and occupation of each individual certificate holder
when a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to 1. pay back all premiums owned plus interest 2. receive payments for a fixed amount 3. purchase a single premium policy for a reduced face amount 4. purchase a term rider attach to the policy
purchase a single premium policy for a reduced face amount
________ refers to the situations that can only result in a loss or no change
pure risk
which of the following factors determines the maount of each installment paid in a life income option arrangement? 1. projected life insurance and health insurance 2. recipient's life expectancy and amount of principal 3. projected income 4. recipient's health and death benefits
recipient's life expectancy and amount of principal
a ______ company results from an interchange of _______ agreements of indemnity among subscribers
reciprocal
which nonforfeiture option provides coverage for the longest period of time? 1. paid-up option 2. accumulation of interest 3. reduced paid-up 4. extended term
reduced paid-up
an insured committed suicide one year after his life insurance policy was issued. the insurer will 1. pay the policy's cash value 2. pay the full death benefit to the beneficiary 3. pay nothing 4. refund the premiums paid
refund the premiums paid
an insured will be allowed to reactivate her lapsed life insurance policy if action is taken within a certain period of time, and proof of insurability is provided. which policy provision allows this? 1. grace period 2. reinstatement provision 3. waiver of premium provision 4. incontestable clause
reinstatement provision
retention
retaining of assets
what is the primary purpose of a 401(k) plan? 1. life insurance 2. retirement 3. education funds 4. to receive dividends over a certain period
retirement
a policyowner who is 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. the policyowner should have her husband named as the 1. primary beneficiary 2. irrevocable beneficiary 3. revocable beneficiary 4. secondary beneficiary
revocable beneficiary
all of the following are true regarding insurability rider EXCEPT 1. insured may purchase additional coverage at attained age 2. insured may purchase insurance up to the amount specified in the base policy 3. allows the insured to purchase additional amounts of insurance without providing insurability only at specified dates or events 4. rider is available to all insureds with no additional premium
rider is available to all insureds with no additional premium
Adverse selection is a concept best described as:
risks with higher probability of loss seeking insurance more often than other risks
which of the following is NOT true of life settlements? 1. seller must be terminally ill 2. could be used for a key person coverage 3. could be sold for an amount greater than the current cash value 4. involve insurance policies with large face amounts
seller must be terminally ill
if an immediate annuity is purchased with the face amount at death or with cash value at surrender, this would be considered a 1. nonforfeiture option 2. rollover 3. settlement option 4. nontaxable exchange
settlement option
an IRA purchased by a small employer to cover employees is known as a 1. 403(b) plan 2. simplified employee pension plan 3. 401(k) plan 4. defined contribution plan
simplified employee pension plan
Cash accumulation
specific amounts of money for specific needs that some life insurance policies include-the cash value can be BORROWED (meaning it's not really their money) against at any time and used for immediate needs
representation
statements are true to the best of the applicants knowledge
D. The insurers guaranteed minimum rate of interest with fixed annuities the company is required to pay at least a guaranteed minimum rate of interest to the owners if the company investments perform well the company will pay a higher interest rate but since the interest rate can never fall below the guaranteed minimum that's what ultimately determines what the company will pay
which of the following ultimately determines the interest rate pay to the owner of a fixed annuity. A. investment performance of the company B. investment performance of the insured C. statewide predetermined annual interest rate D. Insurers guaranteed minimum rate of interest
which of the following types of insurance policies would perform the function of cash accumulation? 1. increasing term 2. whole life 3. term life 4. credit life
whole life
are insurance company underwriters allowed to discriminate?
yes, but not unfairly, the company will discriminate in favor of good risks and not of poor risks; however, it cannot discriminate unfairly by using factors such as race or national origin in their underwriting