Primerica-Life Insurance, All
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) Incontestability period b) Assignment c) Automatic premium loan d) Waiver of premium
c
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 the most common time for errors and omissions to occur on the part of an insurer? a. application process b. policy delivery
Viaticated policy
a life insurance policy or certificate that has been acquired by a viatical settlement contract
Life insurance surrender comparison index disclosure
a life insurance surrender comparison index is given to a purchaser as a means for making cost comparisons of policies having the same premium payment period and pattern
When would a 20 pay whole life policy endow?
a limited pay whole life policy would endows for the face amount at age 100. the premium is completely paid off in 20 years.
If a life insurance policy develops cash value faster than a 7 pay whole life contract, it is
a modified endowment contract
a
all other factors being equal, the least expensive first-year premium payment is found in a. annually renewable term b. decreasing term
Annunity Period
also known as the annuitization period, liquidation period or pay out period, is the time during which the sum that has been accumulated during he accumulation period is converted into a stream of income payment to the annuitant.
In flexible premium payments plans, the term "flexible" refers to the
Amount of premium.
a
An HSA holder who is 65 years old decides to use the money in the account for a nonhealth expense. Which of the following is true? a. there will be a tax b. there will be a tax and a 20% penalty
b
An IRA uses immediate annuities to pay out benefits; the IRA owner is nearly 75 years old when he decides to collect distributions. What kind of penalty would the IRA owner pay? a. No penalties, since the owner is older than 59 ½ b. 50% tax on the amount not distributed as required
2) Fraud.
An agent is trying to convince a potential insured to buy a policy from him, so he misrepresents the benefits of the policy. This is an example of (Choose from the following options)1. Indemnity.2. Fraud.3. Defamation.4. Concealment.
b
At what age may an individual make withdrawals from an HSA for nonhealth purposes without being penalized? a. 59½ b. 65
What does "liquidity" mean in a life insurance policy?
Availability of cash value
A licensed insurance producer must notify the Commissioner of a change of address within
10 days
A licensed producer has
10 days to notify commissioner of change of address, change of phone, etc.
1. A presentation of nonguaranteed elements of a policy
15.The term "illustration" in a life insurance policy refers to (Choose from the following options) 1. A presentation of nonguaranteed elements of a policy 2. A depiction of policy benefits and guarantees 3. Pictures accompanying a policy 4. Charts and graphs.
3. 12 months
19.Within what time period after completing prelicensing education must an applicant file a certificate of education completion with the Commissioner? (Choose from the following options) 1. 30 days 2. 90 days 3. 12 months 4. 2 years
4. Only the annuity owner
22.Which of the following can surrender a deferred annuity contract? (Choose from the following options) 1. Only the insurance company for nonpayment of premiums 2. The beneficiary after the owner's death 3. Deferred annuity cannot be surrendered. 4. Only the annuity owner
What is the maximum penalty for habitual noncompliance with the Fair Credit Reporting Act?
2500 An individual, who willfully violates this ACt enough to constitute a general pattern or business practice, will be subject to a penalty up to 2500
4. Pays dividends to policyowners.
26.Which of the following is usually true of a participating life insurance policy? (Choose from the following options) 1. May be converted to a term life policy. 2. Pays dividends to stockholders.3. Assesses premiums against stockholders. 4. Pays dividends to policyowners.
4. Until the beneficiary's death The Single Life Option can provide a single beneficiary income for the rest of his/her life. Upon the death of the beneficiary, the payments stop.
36.How long will the beneficiary receive payments under the single life settlement option? (Choose from the following options) 1. Until the insured's death 2. For a specified period of time 3. Until the insured's age 100 4. Until the beneficiary's death
2. Non-participating policy
40.A policy that does not pay dividends to policyowners is a (Choose from the following options) 1. Mutual life policy 2. Non-participating policy 3. Participating policy 4. Whole life policy.
2. Indemnity
40.Which provision states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost? (Choose from the following options) 1. Reasonable Coverage Expectations 2. Indemnity 3. Loss-at-Cost 4. Limited Benefits Provision
4. Beneficiary
41.If the annuitant dies during the accumulation period, who will receive the annuity benefits? (Choose from the following options) 1. Owner 2. Insurance company 3. Estate 4. Beneficiary
3. Changing Michigan Insurance Code
43.Which of the following functions may a producer with a temporary insurance license NOT perform? (Choose from the following options) 1. Collect premiums 2. Countersign policies 3. Changing Michigan Insurance Code 4. Solicit applications of insurance
After and insurance company examination, the Commissioner or the examiner appointed by the Commissioner must file a written report within
60 days The report relating to the examination must be filed no later than 60 days after the examination is complete
b
A life insurance policy has a legal purpose if there are both a. Underwriting interest and consent b. insurable interest and consent
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
Which of the following is NOT an appropriate use of a deferred annuity?
Creating an estate
Whom does an insurance agent represent?
Insurance Company
What entities make up the Medical Information Bureau?
Insurers
a
Sarah is upset that her new health insurance policy was delivered to her by certified mail and not through her agent. Which of the following is true? a. there is nothing wrong with the above situation b. sarah should ask for a new policy to be delivered
In insurance, when is the offer usually made on a contract?
When the insurance application is submitted.
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. income is guaranteed for the life of the beneficiary
a
Which of the following is NOT a goal of risk retention? a. To minimize the insured's level of liability in the event of loss b. To increase control of claim reserving and claims settlements
b
Which of the following is NOT an enrollment period for Medicare Part A applicants? a. Special enrollment b. automatic enrollment
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
b
which of the following is an example of a producer being involved in an unfair trade practice of rebating? a. inducing the insured to drop a policy in favor of another one when it's not in the insured's best interest b. telling a client that his first premium will be waived if he purchased the insurance policy today
b)Transfer When insurance is purchased, the insured is, in return for the payment of the premium, transferring the risk of financial loss by certain perils to the insurance company.
#32. When a homeowner purchases insurance on his home, what risk management technique is he practicing?a)Retention b)Transfer c)Avoidance d)Sharing
If an agent fails to obtain an applicant's signature on the application, the agent must -Sign the application for the applicant. -Sign the application, stating it was by the agent. -Send the application to the insurer with a note explaining the absence of signature. -Return the application to the applicant for a signature.
-Return the application to the applicant for a signature. All applications must have the appropriate authorized signatures.
Transfer of proceeds (viatical settlement)
-viator sends executed documents directly to an independent escrow agent -within 3 business days after the escrow agent receives the documents the settlement must be placed into an escrow or trust account -the escrow agent will send the executed documents to the settlement provider who will then instruct the escrow agent to pay the proceeds to the viator
a)Grace period Provided there is sufficient cash value in the policy, this provision triggers a loan at the end of the grace period to keep a policy in force
35. The automatic premium loan provision is activated at the end of the a)Grace period b)Time period c)Ending period d)Policy period
2. Policyowner
37.Who controls changes in premium payments, face value, loans, and policy plans? (Choose from the following options) 1. Agent 2. Policyowner 3. Insurer 4. Beneficiary
4.The type of investment. Typically, the owner of an adjustable life policy has the following privileges: increasing or decreasing the premium, changing the premium-paying period, increasing or decreasing the face amount of coverage, or changing the period of protection.
42.In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT (Choose from the following options) 1. The length of coverage 2. The premium 3. The amount of insurance 4. The type of investment.
3. Single Premium
45.Which type of life insurance policy generates immediate cash value? (Choose from the following options) 1. Decreasing Term 2. Continuous premium 3. Single Premium 4. Level Term
An insured owns a 50,000 whole life policy. At age 47, the insured decides to cancel his poicy and exercise the extended term option for cash value, which is currently 200,000. What would be the face amount of the new term policy?
50,000 the face of the term policy would be the same as the face amount provided under the whole life policy
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
3. It has a guaranteed minimum interest rate
8.Why is an equity indexed annuity considered to be a fixed annuity? (Choose from the following options) 1. It has a fixed rate of return. 2. It is not tied to an index like the S&P 500 3. It has a guaranteed minimum interest rate 4. It has modest investment potential.
2. Annually Renewable Term
9.All other factors being equal, the least expensive first-year premium payment is found in (Choose from the following options) 1. Level Term 2. Annually Renewable Term 3. Increasing Term 4. Decreasing Term.
2. Obtain a list of all life insurance policies that will be replaced
During replacement of life insurance, a replacing insurer must do which of the following? (Choose from the following options) 1. Send a copy of the Notice Regarding Replacement to the Department of Insurance 2. Obtain a list of all life insurance policies that will be replaced 3. Guarantee a replacement for each existing policy 4. Designate a new producer for a replaced policy
b
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 a. Tertiary beneficiary. b. Contingent beneficiary.
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.
In the agent/insurer relationship, who is considered the principal?
Insurer
Which of the following is an example of a limited pay life policy?
Life paid up at Age 65 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 period that is limited, not the maturity.
The reduction, decrease, or disappearance of value of the person or property insured in a policy is known as what?
Loss
What are the three factors that determine the premium for a particular life insurance policy?
Mortality, interest and expense
An insurance policy paid a nontaxable dividend to the insured one year, and nothing the next. From what type of insurer did the insured purchase the policy?
Mutual
What are the three types of hazards?
Physical, moral, and morale.
What term describes the fee a person pays an insurance company to receive coverage?
Premium
What is the best way to handle incomplete insurance applications?
Return the application to the applicant for completion.
A policyowner who is also the insured wants to name her husband as the beneficiary of her policy. She also wishes to retain all of the rights of ownership. The policyowner should have have her husband named as
Revocable beneficiary
a
What are 2 components of Universal policy? a. insurance and cash amount b. insurance and death benefit
b
What characteristic must an annuity have if it is used to accumulate funds in an IRA? a. Tax-deductible b. Tax- qualified
a
What company produces evaluations of insurer financial status often used by the Insurance Department? a. AM Best b. NAIC
a
What does "level" refer to in level term insurance? a. Face amount b. Premium
b
What is surplus lines insurance? a. Insurance in excess of a standard policy's coverage b. Insurance placed with an unauthorized insurer
b
What is the goal of the HMO? a. Providing health services close to home b. Early detection through regular checkups
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
a
Who makes up the Medical Information Bureau? a. insurers b. hospitals
How are the variable annuities regulated? a) By state and federal agencies b) By the National Association of Securities Dealers c) By the Commissioner of Insurance d) By the Department of Insurance
a
Which of the following does NOT have to be disclosed in a long-term care (LTC) policy? a) The aggregate amount of premiums due b) The meaning of the terms "reasonable" and "customary" c) Any limitations or conditions of eligibility for LTC benefits d) Any riders or endorsements
a
insurance companies may be classified according to the legal form of their ownership. The type of company organized to return any surplus money to their policyholders is
a mutual insurer
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
All other factors being equal, the least expensive first-year premium payment is found in a)Annually Renewable Term. b)Increasing Term. c)Decreasing Term. d)Level Term.
a. 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.
b
an insurer wishes to compare the info given in an insurance application with previous insurance applications by the same applicant but for different companies. What organization can help the insurer accomplish this? a. NAIC b. MIB
The full premium was submitted with the application for the life insurance, and the policy was issued two weeks later as requested. When does coverage become effective?
as of the application date if the full premium was submitted with the application and the policy was issued as requested, the policy effective date would generally coincide with the date of application.
Pennsylvania Life and Health Insurance Guaranty Association
cannot be used for advertisement purposes under any cicumstances
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
Regulation of variable life insurance
insurers wanting to sell variable life insurance must first submit to the commissioner a written statement explaining their standards of suitability
which type of insurance is based on mutual agreements among subscribers?
reciprocal insurance
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
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
whole life build cash value
the premium paid by the policyowner also does not change during the life of the policy or during the premium payment period
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
All of the following are requirements for life insurance illustrations EXCEPT -They must differentiate between guaranteed and projected amounts. -They must be part of the contract. -They may only be used as approved. -They must identify nonguaranteed values.
-They must be part of the contract. An illustration may not be altered by an agent and must clearly state that it is not part of the contract. It is legal to list nonguaranteed values in the contract, but they must be specifically labeled as projected, not guaranteed values.
After an insurance company examination, the Commissioner or the Examiner appointed by the Commissioner must file a written report of the examination within
60 days
a
All of the following cases show when a Small Employer Medical plan cannot be renewable EXCEPT a. When the employer chooses to renew the plan. b. 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.
a
An insurer invests the money it receives from premiums paid by its insureds. Which of the following is true regarding the interest earned on these investments? a. It is used to lower premiums. b. It is used to fund executive bonuses
If an annuitant dies before annuitization occurs, what will the beneficiary receive?
Either the amount paid into the plan or the cash value of the plan, whichever is the greatest amount
What are the three types of agent authority?
Express, implied, and apparent.
An agent selling variable annuities must be REGISTERED with whom?
FINRA
An agent selling variable annuities must be registered with
FINRA
A lucky individual won the state lottery, so the state will be sending him a check each month for the next 25 years. What type of annuity products are they likely to use to provide these benefits?
Immediate annuity
a
In a noncontributory health insurance plan, what percentage of eligible employees must participate in the plan before the plan can become effective? a. 100% b. 75%
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.
b
In franchise insurance, premiums are usually a. Higher than individual policies, but lower than group policies. b. Lower than individual policies, but higher than group policies.
a
In health underwriting, it would be inappropriate to decline a risk using any of the following factors EXCEPT a. mental illness b. marital status
a
In respect to the consideration clause, which of the following is consideration on the part of the insurer? a. Promising to pay in accordance with the contract terms b. Explaining policy revisions to the applicant
What two elements are necessary for a life insurance contract to have legal purpose?
Insurable interest and consent.
What do individuals use to transfer their risk of loss to a larger group?
Insurance
What do individuals use to transfer their risk of loss to a larger group? Insurance Insurable interest Exposure Indemnity
Insurance Insurance is the mechanism whereby an insured is protected against loss by a specified future contingency or peril in return for the present payment of premium. Because many other individuals with the same or similar risk of loss are paying premiums, funds are available to indemnify those who actually suffer that loss.
When agents act within the scope of their contract, their actions will be assumed to be the acts of whom?
Insurer
b
Insurer examinations must occur no less frequently than every a. 3 years b. 5 years
Your client is planning to retire. She accumulates $100,000 in a 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 what option?
Straight life option
What are the personal uses of life insurance?
Survivor protection, estate creation and conservation, cash accumulation and liquidity
b
Which of the following LTC Coverages would NOT encourage an insured to receive care at home? a. Respite Care b. residnetial care
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
Fiduciary responsibility of viatical settlement broker
a viatical settlement broker is deemed to: -represent the viator -act in the best interest of the viator -owe a fiduciary responsibility only to the viator
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
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
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
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
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
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.
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
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.
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 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 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
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.
groups formed when several similary related small companies join forces to create a large pool of people insurance will accept as a group
multiple employer trust formed when several similary or related small companies join forces to create a large pool of people that insures a group. The MET purchases a single benefit plan that covers the employees of each of the companies involved.
What defines a peril
cause of loss A peril is a specific cause of loss
3. Revocable beneficiary.
#10. Bonnie wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. Bonnie should have her husband named as thea)Tertiary beneficiary.b)Irrevocable beneficiary.c)Revocable beneficiary.d)Secondary beneficiary. If her husband is named as the revocable beneficiary, Bonnie would be the policyowner and could make changes to the contract. Her husband would receive the death benefit.
Prior to or at the time of execution of the viatical settlement contract the provider must make available a witnessed, written document stating the following:
-the viator consents to the viatical settlement contract -the viator has a full and complete understanding of the viatical settlement contract and has a full and complete understanding of the benefits of the life insurance policy -the viator has entered into the viatical settlement contract freely and voluntarily -if applicable, the insured is terminally or chronically ill and said illness/condition was diagnosed after the life insurance policy was issued -the viator is of sound mind, under no constraint or undue influence
Selection criteria and unfair discrimination
-unfair discrimination is prohibited -issuing an unfairly discriminated policy is a misdemeanor punishable by a fine up to $500
Recission (viatical settlement)
-viator has an unconditional right to rescind the contract for 30 days from the date of the contract and at least 15 days from when the proceeds are received -if the viator dies in this time period, the contract is considered rescinded and is carried out as the intended life insurance policy
c)Concealment In insurance, concealment is the withholding of information that will result in an imprecise underwriting decision.
10. An applicant who knowingly fails to communicate a fact that would help an underwriter make a sound decision regarding coverage is guilty of a)Fraud b)Misrepresentation c)Concealment d)Lying.
1. Specified
10.All of the following are beneficiary designations EXCEPT (Choose from the following options) 1. Specified 2. Tertiary 3. Contingent 4. Primary.
A person must work how many hours for the Keogh plan to be effective?
1000 hours a year
2. Require evidence of insurability.
16. If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer maya)Increase medical requirements on existing members.b)Require evidence of insurability.c)Require a higher premium.d)Prolong the open enrollment period. In group underwriting the evidence of insurability is usually not required of each participant unless he or she is enrolling for coverage outside of the normal enrollment period.
2. Option B
16.Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? (Choose from the following options) 1. Option A 2. Option B 3. Corridor option 4. Variable option
1. An index like Standard & Poor's 500
30.The equity in an equity index annuity is linked to (Choose from the following options) 1. An index like Standard & Poor's 500 2. The returns from the insurance company's separate account 3. The annuitant's individual stock portfolio 4. The insurance company's general account investments.
b)Express Authority Express powers are written into the contract between the insurer and the agent.
31. The authority granted to an agent through the agent's contract is referred to as a)Absolute Authority b)Express Authority c)Apparent Authority d)Implied Authority.
2. A new Commissioner or Director is put into office.
48.All of the following events will terminate a producer's certificate of appointment EXCEPT (Choose from the following options) 1. A producer's license is suspended or revoked by the Department of Insurance 2. A new Commissioner or Director is put into office 3. A producer's license expires and is not renewed 4. A termination issued by the appointing insurer.
If a consumer requests additional information concerning an Investigative Consumer Report, how long does the insurer or reporting agency have to comply? 7 days 10 days 3 days 5 days
5 days Consumers must be advised that they have a right to request additional information concerning Investigative Consumer Reports, and the insurer or reporting agency has 5 days to provide the consumer with the additional information.
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 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.
An investor busy a life policy on an elderly person in order to sell it for a life settlement. This is an example of
A STOLI Policy Stranger Oriented Life Insurance policies are usually purchased by people who have no relationship with the insured with intention of selling them for life settlements
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 (Stranger originated life insurance policies are usually purchased by people who have no relationship with the insured with the intention of selling them for life settlements.
a
A Universal Life insurance policy has two types of interest rate that are called a. Guaranteed and Current b. minimum and target
What are the most common penalties for violations of insurance statutes?
A cease and desist order, a fine, and license suspension or revocation.
a
A situation in which a person can only lose or have no change represents a. Pure risk. b. Speculative risk.
b
A life insurance policyowner skips her premium payment, but the policy does not lapse. Instead, the premium amount is deducted from the cash value of the policy. What type of policy is this? a. adjustable life b. universal life
b
A life insurance policyowner skips her premium payment, but the policy does not lapse. Instead, the premium amount is deducted from the cash value of the policy. What type of policy is this? a. whole life b. universal life
b
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. Fixed
a
A married couple's retirement annuity pays them $250 per month. The husband dies and his wife continues to receive $125.50 per month for as long as she lives. When the wife dies, payments stop. What settlement option did they select? a. joint and survivor b. joint annuity
What is policy replacement?
A new policy is issued while an existing policy is terminated or reissued with a reduction in cash value.
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.
When risks with higher probability of loss are seeking insurance more often than other risks, this is known as what?
Adverse selection
If a person purchases a flexible premium deferred annuity, when is the soonest that income payouts will begin?
After 1 year.
b
After a person's employment is terminated, it is possible to obtain individual health insurance after losing the group health coverage provided by the employer. Which of the following is NOT true? a. The employee can convert from group to individual insurance within 31 days of termination. b.By law, the new, individual policy must provide the same benefits as the group insurance policy.
With a Single Premium Deferred Annuity (SPDA), when are the benefits paid?
After more than 1 year.
b
An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer? a. $8000 tax on growth only b. $8000 no tax consequence
a
An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer? a. $10,000, no tax consequence b. $8,000, no tax consequence
a
An individual has just borrowed $10,000 from his bank on a 5-year note. What type of life insurance policy would be best suited to this situation? a. Decreasing term b. universal life
Who can make a fully deductible contribution to a traditional IRA?
An individual who has earned income
a
Anna loses her left arm in an accident that is covered by her Accidental Death and Dismemberment policy. What kind of benefit will Anna most likely receive from this policy? a. The capital amount in a lump sum b. The principal amount in a lump sum
b
Annually renewable term policies provide a level death benefit for a premium that a. Decreases annually. b. increases annually
a
Annually renewable term policies provide a level death benefit for a premium that a. Increases annually. b. Decreases annually.
If a loss occurs, insurance policies pay the proceeds to Beneficiary Applicant Insurer Agent
Beneficiary The beneficiary is the person who receives the benefits from the insurance policy.
Which of the following is a feature of a variable annuity?
Benefit payment amounts are not guaranteed
Which of the following is a feature of a variable annuity?
Benefits payment amounts are not guaranteed
What license or licenses are required to sell variable annuities?
Both Life insurance and securities licenses.
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
Which of the following best describes fixed period settlement options?
Both the principal and interest will be liquidated over a selected period of time. Under the fixed period option (also called period certain), a specified period of years is selected, and equal installments are paid to the recipient. Both the principal and interest are liquidated together over the selected period of time.
What type of annuity promises to pay to a beneficiary, in a lump sum, the difference between the amount paid into the contract and the benefits received prior to the annuitants death?
Cash refund annuity
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
Charla wants to serve as a producer for Commissions Galore Insurance Company. In addition to obtaining her producer's license, what else must happen before she can officially transact insurance for CGIC? a. She must be appointed specifically by CGIC. b. she must be appointed by the Commissioner
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 application.
b
Concerning insurance, the definition of a fiduciary responsibility is a. Commingling premiums collected with agent's personal funds. b. handling insurer funds in a trust capacity
Which of the following are NOT fundable by annuities?
Death benefits
Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income?
Depreciation period
According to the Fair Credit reporting act
Disputes regarding comsumer information would not be considered negative information
Ann is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return tha will equal the performance of the Standard and poors 500 index. She would likely purchase an
Equity Indexed Annuity
Life insurance may be used to pay state inheritance taxes and federal estate taxes elimination the need to sell assets from estate. What is this called?
Estate conservation
a
Evaluating information that establishes adverse selection risk is the purpose of which stage of insurance? a. underwriting b. application
a
Even though "sickness" is a peril covered by a health insurance policy, coverage may be limited or excluded because of all of the following EXCEPT a. exemption periods b. occupational exclusions
Insurance is used to transfer what to the insurance company?
Financial responsibility for loss.
a
HIPAA applies to groups of a. 2 or more b. at least 100
How does the premium mode affect the total premium paid for insurance for the year?
Higher frequency of premium payments will result in higher overall premium
b
If an insurer becomes insolvent, which of the following would pay benefits to policyholders? a. the state b. Guaranty Association
a
If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it? a. unilateral b. conditional
a
In which of the following cases would a credit disability policy be issued? a. If an individual is in debt to a specific creditor, payments will be made for him/her until the return to work. b. A person receiving disability benefits cannot receive a credit disability policy.
An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of a report is that? Inspection Report Medical Information Bureau's report Agent's Report Underwriter's Report
Inspection Report Inspection reports cover moral and financial information regarding a potential insured, usually supplied by private investigators and credit agencies. Companies that use inspection reports are subject to the rules outlined in the Fair Credit Reporting Act.
b
Inspection report may be obtained by an insurance company from a. the agent b. independent investigating firm
An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering a(n) Attending Physician Statement. Inspection report. Medical Information Bureau report. Medical examination.
Inspection report.
What type of report provides information about the applicant's hobbies, habits, and financial status?
Inspection report.
What are the three main instances when insurable interest exists in life insurance?
Insuring your own life, the life of a family member, or the life of a business partners or someone who has a financial obligation to the policyowner
A couple near retirement is planning for their golden years. They want to make sure that their retirement annuity provides monthly benefits for the rest of their lives. Should one of them die, the other would still like to continue receiving benefits. Which settlement option should they choose?
Joint and Survivor
What law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?
Law of large numbers
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
Which of the following is an example of a limited-pay life policy?
Life Paid-up at age 65 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.
Mortality tables are used by insurance companies to predict what?
Life expectancy and the death rates for specific groups of individuals
What type of insurance creates an immediate estate?
Life insurance
What type of insurance would perform the function of cash accumulation?
Life insurance
What license or licenses are required to sell variable annuities?
Life insurance AND securities license
What is incorrect about IRA's?
Married couples are required to purchase a jointly owned IRA
b
Medicaid provides all of the following benefits EXCEPT a. Family planning services. b. Income assistance for work-related injury.
What is included in part 2 of a life insurance application?
Medical information about the perspective insured
a
Medicare Advantage is also known as a. Medicare Part C b. Medicare Part D
What would happen if a prospective DEFERRED annuity owner surrendered the annuity before the annuitization period?
Nonforfeiture option guarantees that the owner will receive a surrender value of the contract (100% of the premium paid, less any prior withdrawals and related surrender charges)
Under a straight life annuity, if the annuitant dies before the principal amount is paid out, the beneficiary will receive..
Nothing...payments will cease
What document must a producer provide to the insured during policy replacement?
Notice regarding replacement
b
Occasional visits by which of the following medical professionals will NOT be covered under LTC's home health care? a. Community-based organization professionals b. Attending physician
Which of the following will be included in a policy summary
Premium amounts and surrender values
What is the term that describes the frequency and the amount of the premium payment?
Premium mode
Under a pure life annuity, an income is payable by the company...
Only for the life of the annuitant
Which of the following can surrender a deferred annuity contract?
Only the annuity owner
Which explains the policy owner rights to change beneficiaries, choose options and receive proceeds of a policy?
Owner's rights
IN which of the following instances would the premium be tax dedcutible
Premiums paid on a 30,000 ife insurance group term life insuranc eplan for an employee
An insurer wants to obtain info on an applicant. What must insurer do?
Present the insured with a Disclosure authorization notice
What are illustrations in a life insurance policy?
Presentations of nonguaranteed elements of the policy
If an insurer needs to obtain information about the applicant from investigators, what is the insurer required to do?
Provide the applicant a Disclosure Authorization Notice
What type of risk is insurable?
Pure
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
a
Regarding the concept of creditable coverage, the number of days of coverage spent under the group plan will be used to reduce the 12-month waiting period for pre-existing conditions coverage if the employee doesn't have a break in coverage of more than a. 63 days b. 31 days
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
A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. It is required that his policy
Required a premium increase each year
What are the strategies used by underwriters to prevent adverse selection?
Restriction of coverage, refusal to accept a risk, and accepting a risk at a higher rate.
Equity indexed annuities
Seek higher returns.
If an agent fails to obtain the applicant's signature on the insurance application, what must the insurer do?
Send the application back to the applicant for signature.
Wagering on a sporting event is known as what type of risk?
Speculative
A 403(b) plan, commonly referred to as a TSA, is available to be used by whom?
Teachers and not-for-profit organizations
What law protects consumers from the circulation of inaccurate or obsolete information?
The Fair Credit Reporting Act
Which of the following entities established the Do-Not-Call Registry? The Better Business Bureau The NAIC The Consumer Protection Agency The Federal Trade Commission
The Federal Trade Commission The FTC established the do-not-call list in order to protect consumers against unwanted solicitations.
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
When does an insurance policy go into effect?
When the policy is delivered and the premium is paid.
If an applicant does not receive his or her insurance policy, who would be held responsible?
The agent
What is the purpose of the agent's report during the application process?
The agent's report discusses the agent;s personal observation about the proposed insured that may help in the underwriting process
Whose responsibility is it to determine that all the questions on an insurance application are answered?
The agents
Variable annuities
The annuitant assumes the risks on investment
Which of the following is true regarding variable annuities?
The annuitant assumes the risks on investment
Which of the following is true regarding variable annuities?
The annuitant assumes the risks on investment.
Which is NOT true about beneficiary designations
The beneficiary must have insurable interest in the insured. A beneficiary is the person or interest to whom the policy proceeds will be paid upon the death of the insured. Beneficiaries do not have interest in the policy holder.
The annuity owner dies while the annuity is still in accumulation stage. Which of the following is true?
The beneficiary will receive the greater of the money paid into the annuity or the cash value
A business is the owner and beneficiary of a key-person life policy. When the business collects the policy benefit, how is it taxed?
The benefit is received tax free.
Who is a replacing insurer?
The company that issues a new policy during policy replacement
If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriters main concern?
The existence of insurable interest between the applicant and the insured
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 life insurance policy?
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 dies of any other cause.
Who is responsible for the contents of insurance advertisements?
The insurance company
When a fixed annuity owner pays his/her insurance company a monthly premium, where is the money placed?
The insurance company's general account.
a
The insurer must be able to rely on the statements in the application, and the insured must be able to rely on the insurer to pay valid claims. In the forming of an insurance contract, this is referred to as a. Utmost good faith. b. Reasonable expectations.
All of the following are true of an annuity owner EXCEPT
The owner must be the party to receive benefits.
Who must have insurable interest in the insured?
The policy owner
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
In calculation the amount of life insurance needed, what is the needs approach based on?
The predicted needs of a family after the premature death of the insured
What is insurance underwriting?
The process of risk selection and classification
a
The provision which prevents the insured from bringing any legal action against the company for at least 60 days after the proof of loss is known as a. legal action b. time limit on certain defenses
a
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.
A deferred annuity is surrendered prior to annuitization. Which of the following best describes the nonforfeiture value of the annuity?
The surrender value should be equal to 100% of the premium paid minus any prior withdrawals and surrender charges.
a
The three main differences between fixed and variable annuities include all of the following EXCEPT a. mortality b. underlying investments
How are contributions to a tax sheltered annuity treated with regards to taxation?
They are not included as income for the employee, but are taxable upon distribution.
Not True regarding Equity Indexed Annuities?
They earn lower interest rates than fixed annuities.
Which of the following is NOT true regarding Equity Indexed Annuities?
They earn lower interest rates than fixed annuities.
Which of the following is true for both equity indexed annuities and fixed annuities?
They have a guaranteed minimum interest rate
b
To be eligible under HIPAA regulations, for how long should an individual converting to an individual health plan have been covered under the previous group plan? a. 63 days b. 18 months
For the purpose of insurance, what is risk?
Uncertainty of loss.
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
Which of the following is NOT considered earned income?
Unemployment benefits
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?
Variable
a
Which clause allows both the insured and dentist to know in advance which benefits will be paid? a. precertification b. preadmission
b
Which nonforfeiture option has the highest amount of insurance protection? a. reduced paid-up b. extended term
A husband and wife are insured under group health insurance plans at their own places of employment, and as dependents under their spouse's coverage. If one of them incurs hospital expenses, how will those expenses likely be paid? a) The benefits will be coordinated. b) Neither plan would pay. c) Each plan will pay in equal shares. d) The insured will have to select a plan from which to collect benefits.
a
Under the uniform required provisions, proof of loss under a health insurance policy normally should be filed within a) 90 days of a loss. b) 20 days of a loss. c) 30 days of a loss. d) 60 days of a loss
a
When a life insurance policy was issued, the policyowner designated a primary and a contingent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident, and it was impossible to determine who died first. Which of the following would receive the death benefit? a) The insured's contingent beneficiary b) The insurance company c) The insured's estate d) The primary beneficiary's estate
a
Which of the following is TRUE about a class designation? a) Beneficiaries are not identified by name. b) Beneficiaries must be part of the insured's immediate family. c) It is not allowed. d) It determines the succession of beneficiaries.
a
Which of the following is true regarding a term health policy? a) It is nonrenewable. b) It is conditionally renewable. c) It is guaranteed renewable. d) It is noncancellable.
a
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
joint life
a joint life policy would be the least expensive because the premiums are based on the average age, and the death benefit would be paid out at the first death.
Viatical settlement provider
a person other than a viator who enters into a viatical settlement contract
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
Viatical settlement
a terminally ill insured/owner selling his/her policy to a third party for less than the death benefit but more than the cash values in order to obtain funds when no other sources are readily available
#43. An insured misstates her age at the time the life insurance application is taken. This misstatement may result in a)Adjustment in the amount of death benefit. b)No change whatsoever c)Automatic lapse d)Recession of the policy
a)Adjustment in the amount of death benefit. If the applicant has misstated his or her age or gender on the application, the insurer, in the event of a claim, is allowed under this provision to adjust the benefits to an amount that the premium at the correct age or gender would have otherwise purchased.
the two types of assignment
absolute and collateral
a insurance company that is domiciled in one country and transacts insurance in another is:
alien insurer
C. Premiums
all of the following are examples of risk retention EXCEPT? A. co-payments B. Self-insurance C. Premiums D. deductibles
a
all of the following could own group life insurance EXCEPT a. group needed low-cost insurance b. a group sponsored by an employer
b
all of the following statements describe a MEWA except a. MEWAs can be self-insured b. MEWAs are groups of at least 3 employers
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
Accumulation period
also known as the pay-in period, is the period of time over which the owner makes payments into an annuity.
No person can act as a viatical settlement provider or broker without...
an appropriate license from the department of insurance which includes: -submission of an audited financial statement no older than 1 year and 120 days old -submission of an audited financial statement as of the end of the most recent quarter -the licensing fee (provider: $300; broker: $100)
most common use of life insurance by businesses is:
an employee benefit-serves a a protection for employees and their beneficiaries
bequests
an insured may wish to leave funds to their church, school, or other organization at the time of their death
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
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
which type of authority is based on the actions, words, or deeds of the principal?
apparant
A policy owner fails to pay the premium on his whole life after the grace period passes but the policy remains in force. THis is due to the
automatic premium loan 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 a premium
All of the following are dividend options EXCEPT a) Paid-up additions. b) Fixed-period installments. c) Accumulated at interest d) Reduction of premium.
b
For how many days of skilled nursing facility care will Medicare pay benefits? a) 90 b) 100 c) 30 d) 60
b
In which Medicare supplemental policies are the core benefits found? a) Plans A-D only b) All plans c) Plans A and B only d) Plan A only
b
Producers are responsible to collect and disperse premiums, and return premiums or other funds. Which insurance term is associated with this? a) Monetary gatekeeping b) Fiduciary capacity c) Financial trust d) Brokering
b
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 offers tickets to a baseball game as an inducement to buy insurance. b) An agent uses misrepresentation to convince a person to cancel an existing policy and take a new policy from him. c) An agent offers the use of his lake house to person as an inducement to buy. d) An agent offers to share his commission with a policyholder.
b
Terminally ill patients are expected to survive how many months or less? a) 25 b) 24 c) 6 d)
b
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) 18 months b) 2 years c) 6 months d) 1 year
b
Which of the following best describes the MIB? a) It is a rating organization for health insurance. b) It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance. c) It is a government agency that collects medical information on the insured from the insurance companies. d) It is a member organization that protects insured against insolvent insurers.
b
Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information? a) Consumer Privacy Act b) The Fair Credit Reporting Act c) Unfair Trade Practices Law d) The Guaranty Association
b
Which of the following statements is true regarding LTC insurance? a) LTC policies must allow a 60-day free-look period. b) Every policy must offer nonforfeiture benefits to the applicant. c) Every policy must offer reduced paid-up insurance to the applicant. d) LTC policies may not include any riders.
b
With regards to premium rates, which of the following statements is NOT true? a) If a premium rate is disapproved, the Commissioner must hold a hearing if requested by the insurer. b) The Commissioner sets all insurance premium rates used in Pennsylvania. c) Pennsylvania is a "prior approval" state in that premiums rates must be filed with the Insurance Department and approved by the Commissioner. d) After a premium rate is filed, the insurer must wait 30 days or until approval is received from the Commissioner before using the new rate.
b
15. A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy a)Decreased death benefit at each renewal b)Required a premium increase each renewal c)Built cash values d)Required proof of insurability every year
b)Required a premium increase each renewal Annually Renewable Term policies' premiums are adjusted each year to the insured's attained age; however, the policy may be guaranteed renewable. Death benefits remain level, and as with any term policy, there are no cash values.
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 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
Insurance policies ensure that after a loss proceeds will go to the
beneficiary the beneficiary is the person who receives the benefits from the insurance policy
All of the following are characteristics of group life insurance EXCEPT a) Individuals covered under the policy receive a certificate of insurance. b) Certificate holders may convert coverage to an individual policy without evidence of insurability. c) Premiums are determined by the age, sex and occupation of each individual certificate holder. d) Amount of coverage is determined according to nondiscriminatory rules.
c
If an insured continually uses the automatic premium loan option to pay the policy premium, a) The cash value will continue to increase. b) The insurer will increase the premium amount. c) The policy will terminate when the cash value is reduced to nothing. d) The face amount of the policy will be reduced by the automatic premium loan amount.
c
Insurance producers that do not have company appointments are considered a/an a) Agent. b) Producer. c) Representative of the consumer. d) Managing General Agent.
c
Under the Affordable Care Act, which classification applies to health plans based on the amount of covered costs? a) Grandfathers and non-grandfathered b) Risk classification c) Metal level classification d) Guaranteed and nonguaranteed
c
a ______ company results from an interchange of _______ agreements of indemnity among subscribers
reciprocal
What is a material misrepresentation? a) Any misstatement by the producer b) Concealment c) A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company d) Any misstatement made by an applicant for insurance
c
What is the maximum period that an insurer would pay benefits in accordance with an Additional Monthly Benefit rider? a) For the duration of the disability or the contract, depending on which ends first b) 1 month c) 1 year d) 2 years
c
Which of the following are the authorities that an agent can hold? a) Authorized and admitted b) Primary and secondary c) Express and implied d) Apparent and allowed
c
45. 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? a)45 days b)7 days c)15 days d)30 days
c)15 days The insurer has 15 days to file a notice of producer appointment.
#40. An agent is trying to convince a potential insured to buy a policy from him, so he misrepresents the benefits of the policy. This is an example of a)Concealment b)Indemnity c)Fraud d)Defamation .
c)Fraud Fraud is the intentional misrepresentation used to induce another party to make or refrain from making a contract, or to deceive or cheat a party
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.
a tax sheltered annuity is a special tax favored retirement plan available to
certain groups of employees only a tax sheltered annuity is a special tax favored retirement plan available only to certain groups of employees (nonprofit, education, other 501c3 organizations, including all employees in public education.)
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
If the policy being viaticated has been in force less than 2 years the viator must...
consent in writing to let the policy's contestability period run until after the insurer has completed its good faith investigation regarding the validity of the insurance contract
straight life
continuous premium whole life, charges a level annual premium for the lifetime of the insured and provides a level, guaranteed death benefit. it build cash value. straight life has the lowest annual premium among whole life policies.
Effects of divorce on designation of beneficiaries
court may order the continuation of beneficiary designations as stated in the policy when originally purchased
After a hearing, if the Commissioner finds that a licensee is in violation of the state insurance laws, the Commissioner can do any of the following EXCEPT a) Impose a civil penalty. b) Issue a cease and desist order. c) Suspend or revoke the license. d) Imprison the licensee.
d
All of the following are Nonforfeiture options EXCEPT a) Cash surrender b) Extended term c) Reduced paid-up d) Interest only
d
Events or conditions that increase the chances of an insured loss occurring are referred to as a) Exposures. b) Risks. c) Perils. d) Hazards.
d
Under which of the following circumstances can financial institutions share insurance coverage information with third parties, for the purpose of soliciting the purchase of insurance? a) Whenever it is requested by the Commissioner b) Under no circumstances; nonpublic personal financial information cannot be shared with third parties c) If a consumer decides to opt out d) If a consumer does not sign and return the notice of disclosure within 30 days
d
What kind of LTC benefit would provide coverage for care for functionally impaired adults on a less than 24-hour basis? a) Residential Care b) Respite Care c) Home Health Care d) Adult Day Care
d
Which of the following dental insurance categories would cover the filling of cavities? a) Orthodontic care b) This type of work is not covered. c) Routine and preventative maintenance d) Routine and major restorative care
d
Which of the following statements is true regarding the cash value in a Universal life policy? a) The insurer credits the cash value in the policy with a guaranteed interest rate. b) The insurer backs the cash value with a nonguaranteed interest rate. c) The insurer backs the cash value with a current interest rate. d) The insurer credits the cash value in the policy with a current interest rate.
d
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.
face value
death benefit
other insurance provision
defines how each policy will pay
mutual insurance company
dividend checks
Which of the following is NOT among the primary ways deductibles for major medical plans can be paid?
en embedded deductible. Deductibles for a major medical plans can be paid in one of the following primary ways: a FLAT dollar deductible, a PER CAUSE deductible, and a MAXIMUM annual deductible FM PC
which is the following provisions make a contract complete
entire contract
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 authorities can an agent hold?
express and implied
Which nonforfeiturue option has the highest amount of insurance protection
extended coverage The extended term nonforfeitfture option has the same face amount as the original policy but for a shorter period of time
If a beneficiary wanted a guarantee that benefits paid from principal and interst would be paid for a period of 10 years before being exhausted, what would a beneficiary select?
fixed period. the beneficiary would determine how long benefits would be paid. The insurer would determine how much would be paid in each installment.
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.
All of the following are considered Social Security Benefits EXCEPT
group Social security provides 3 types of benefits: Retirement, Disability and Survivors
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
Testimonials
if a testimonial of a person with vested interest in the company is used, it must be prominently displayed in the advertisement
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
Should the Commissioner request information from a certificate holder, licensee, or other person under the jurisdiction of the commissioner. If no time specified they must comply
in 30 days. state law provides that if a time is not specified, the person shall comply with the request within 30 days and shall provide all documents ot material to the Commerissionar has qr
b
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
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
b
insurance companies that hold a certificate of authority to transact insurance in LA must be examined how often? a. every 4 years b. every 5 years or as often as the Commissioner feels is necessary
annuity
is a contract that provides income for a specified period of years, or for life. An annuity protects a person against outliving his or her money. Annuities are not life insurance, but rather a vehicle for the accumulation of money and the liquidation of an estate.
Which of the following statements best describes the effect the Accelerated Benefit provision would have on the benefits paid to the beneficiary
it will decrease the benefits paid
decreasing term policy
level premium and a death benefit that decreases each year of the policy. Most commonly used with mortgage
increasing term policy
level premium, as do all policies, but the face amount increases every year of the policy term
An illustration
may not be altered by an agent and must clearly state that it is not part of the contract. It is legal to list nonguaranteed values in the contract, but they must be specifically labeled as projected, not guaranteed values.
On its advertisement, a company claims that it has funds in its possession that are in fact, not available for the payment of losses or claim. The company is guilty of
misrepresentation
what is the term for how frequently a policeowner is required to pay the policy premium
mode is the manner or frequency that the policyowner pays the policy premium
b
nontaxable transaction a. rollover b. 1035 exchange
Health status (viatical settlement)
once the agreement is complete, the new policy owner may, only through the producer or broker, periodically check the health status of the viator: -once every 3 months if the life expectancy is more than 1 year -no more than once a month if the life expectancy is 1 year or less
single premium whole life
one time lump sum premium payment to provide a level death benefit to the maturity of the policy. Single premium policies generate immediate cash value due to the size of the lump sum premium payment.
The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as
one year term option the dividend is utilized to purchase one year term insurance.
The insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest and the policy cash value, to pay the policy up early
paid up option
which of the following riders would not cause a death benefit to increase?
payor benefit rider
What is the term for the causes of loss insured against in a insurance policy?
peril
Accelerated living benefit provision rider's effect on death benefit
policy must clearly state that the death benefit will be reduced if an accelerated benefit is paid and if the accelerated benefit is equal to 100% of the death benefit, the policy terminates
level term life insurance
premiums remain the same thoughout the life of the policy
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
________ refers to the situations that can only result in a loss or no change
pure risk
what type of risk is insurable?
pure risk
the employer
receives a master plan, and the employees receive certificate of insurance, NOT individual policies
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. which policy provision allow this?
reinstatement provision
retention
retaining of assets
Equity indexed annuities
seek higher returns these are not securities. They invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity, the equity indexed annuity has a guaranteed minimum interest rate. The current interest rate that is actually credited is often tied to a familiar index like the Standard and Poohs 500
Liquidation
selling assets as a method of raising capital
Variable annuity
serves as a hedge against inflation, and is variable from the standpoint that the annuitant may receive different rates of return on the funds that are paid into the annuity.
limited pay whole life
specifies a set number of years during which the policyowner must pay premiums. After premium is paid up, the policy remains in force for the insureds lifetime. Limited pay policies have higher premiums than straight life policies because the premium payment period is condensed.
Which of the following would be considered a nonqualified retirement plan?
split dollar amount Examples of nonqualified plans are individual annuities and deferred compensation plans for highly paid executives, split dollar insurance Section 162 executive bonus plans.
term life insurance
temporary protection that lasts only for a specified period of time. if the insured dies during the specified timeframe, the policy pays the death benefit to the beneficiaries. Term policies provide the greatest amount of coverage for the lowest premiums. It is pure death protection
An adjustable life policyowner can change what?
the coverage period
The 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
the full death benefit
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)
b
under SIMPLE plans, participating employees may defer up to a specified amount each year, and the employer then makes a matching contribution up to an amount equal to what % of the employee's annual wages? a. 5 b. 3
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
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
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 the payments already made
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
What is the purpose of the buyer's guide?
To allow the consumer to compare the costs of different policies
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
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
When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option?
Fixed amount settlement
What are the three ratings of classification that denotes the risk level of insureds?
Standard, substandard, and preferred
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
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
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.
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
Who has the legal title of the property in a trust? a. guardian b. trustee c. grantor d. beneficiary
b. trustee
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.
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 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
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
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.
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
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 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
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.
an insured modifies his insurance claims, illegally adjusting them to display a lower amount. what insurance concept does this violate?
utmost good faith
When must insurable interest exist in a life insurance policy?
At the time of application
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.
All of the following statements are true regarding mortgage protection insurance EXCEPT A. It is used to pay off the balance on the mortgage. B. The face amount decreases as the amount owed on the mortgage decreases. C. It's a decreasing term insurance. D. The face amount remains the same throughout the life of the policy.
D. The face amount remains the same throughout the life of the policy. Mortgage Protection Term (or Mortgage Redemption) policy is a type of decreasing term insurance in which the face amount directly correlates with the amount of outstanding loan and length of time remaining on a mortgage. The face amount decreases as the amount owed on the mortgage decreases.
Which government program allows a blackout period?
Social Security
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.
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
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 would be the best option that would help the surviving spouse of the insured to put her child through daycare after the insured's death? A. Estate conservation B. Life insurance proceeds C. State Education Waiver D. Viatical settlement
Life insurance proceeds
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 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 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
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.
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
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 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
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.
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 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.
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.
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
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
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
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
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
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
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.
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.
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.
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
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.
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
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? (Choose from the following options) 1. Term life 2. Limited pay 3. Universal life 4. Adjustable life
3) Universal 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.
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.
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
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
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
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.
Who makes up the Medical Information Bureau?
Insurers
Which of the following is usually true of a participating life insurance policy?
It may pay dividends to policyowners. Participating is a term used to refer to any insurance policy that distributes its dividends by cash payments, reduced premiums, units of paid-up life insurance, a savings program, or by the purchase of term insurance. Dividends, however, are not guaranteed.
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
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
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.
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.
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
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 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
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
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
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
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.
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
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
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
b)The guardian may or may not be accountable for assets The guardian and trustee may be the same person or different people. The primary difference in function is that the trustee is accountable for assets, whereas the guardian may or may not be accountable for assets.
#14. Life insurance benefits for minors must be placed in the hands of either a guardian or a trustee. Which of the following is true? a)The trustee is not accountable for assets b)The guardian may or may not be accountable for assets c)The guardian must also be the trustee d)The guardian and trustee cannot be the same person
a
All of the following statements about Medicare Part B are correct EXCEPT a. It is a compulsory program. b. It is financed by tax revenues.
d)Business Entity Business entity means a corporation, association, partnership, limited liability company, limited liability partnership, or other legal entity.
#15. Which of the following could be used when a corporation, association, partnership, or limited liability partnership acts as a producer? a)Natural Group b)Stock Company c)Mutual Company d)Business Entity
c)4 years Each agent and agency must keep a file of all advertising printed, published or prepared by the agency along with records of the advertising's distribution. Files must be maintained for a period of 4 years.
#18. For how many years is an insurer required to maintain a complete file of its advertisements? a)1 year b)2 years c)4 years d)5 years
d)The annuitant's life expectancy is taken into consideration for the annuity. While they don't have to be, the annuitant and annuity owner are often the same person. The annuitant is the person who receives benefits or payments from the annuity and for whom the annuity is written. Since the annuitant's life expectancy is taken into consideration, the annuitant must be a natural person
#19. Which of the following is NOT true regarding the annuitant? a)The annuitant receives the annuity benefits. b)The annuitant must be a natural person. c)The annuitant cannot be the same person as the annuity owner. d)The annuitant's life expectancy is taken into consideration for the annuity.
a)Annuitant The annuitant receives payments from an annuity and is the person whose life expectancy is considered when writing the contract. The annuitant and annuity owner are often the same person but do not have to be.
#23. When an annuity is written, whose life expectancy is taken into account?a)Annuitant b)Beneficiary c)Life expectancy is not a factor when writing an annuity d)Owner
a)Option A Under Option A, the death benefit remains level while the cash value gradually increases. The death benefit will increase at a later date in order to maintain a gap between the cash value and the death benefit before the policy matures.
#29. Which Universal Life option has a gradually increasing cash value and a level death benefit? a)Option A b)Juvenile life c)Term insurance d)Option B
#39. An agent accepts the premium payment 35 days after it is due, telling the insured that there will not be a problem keeping the policy in force. This is an example of what type of agent authority? a)Express b)Implied c)Assumed d)Apparent 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.
#39. An agent accepts the premium payment 35 days after it is due, telling the insured that there will not be a problem keeping the policy in force. This is an example of what type of agent authority?a)Express b)Implied c)Assumed d)Apparent 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.
d)Gradually increases each year by the amount that the cash value increases. Under Option B the death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases
#44. Universal Life Option B includes the annual increase in cash value; the death benefit under this option a)Decreases by the amount that the cash value increases. b)Increases for the first few years of the policy, and then levels off. c)Remains level. d)Gradually increases each year by the amount that the cash value increases
b)Fraud False advertising is the illegal practice of advertising or circulating materials that are untrue, deceptive, or misleading
#46. An insurance company has published a brochure that inaccurately portrays the advantages of a particular insurance policy. What is this an example of? a)False advertising b)Fraud c)Embellishment d)Defamation
d) Apparent
#5. An agent accepts the premium payment 35 days after it is due, telling the insured that there will not be a problem keeping the policy in force. This is an example of what type of agent authority?a)Express b)Implied c)Assumed d)Apparent 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.
d)$50,000 The cost of coverage paid by the employer in excess of $50,000 is taxed to the employee.
#6. 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
#6. 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
#6. 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 insuranceb)10-year endowmentc)Life annuity, period certaind)Increasing term insurance Premium payments will cease at her age 65, but coverage will continue to her death or age 100.
d)Business Entity Business entity means a corporation, association, partnership, limited liability company, limited liability partnership, or other legal entity.
#8. Which of the following could be used when a corporation, association, partnership, or limited liability partnership acts as a producer? a)Natural Group b)Stock Company c)Mutual Company d) business entity
While equity indexed annuities earn higher interest rates than fixed annuities, both types of annuities guarantee a specific minimum interest rate. c)It has a guaranteed minimum interest rate
#9. Why is an equity indexed annuity considered to be a fixed annuity? a)It has a fixed rate of return b)It is not tied to an index like the S&P 500 c)It has a guaranteed minimum interest rate d)It has modest investment potential.
a)Limited pay whole life insurance
#9. 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 Premium payments will cease at her age 65, but coverage will continue to her death or age 100.
Multiple viators
-if there are multiple viators on single policy and they reside in different states, the settlement is governed in the state of the viator with larger portion of ownership -if ownership is equal, the viators agree on which state will be used
Verification of coverage (viatical settlement)
- a provider or broker requests a verification of coverage from the insurer who issued the policy being viaticated -this request must be accompanied by a copy of the requried medical release, a copy of the viator's application for the settlement contract, and a copy of the notice required -insurer must complete and transmit the verification no later than 30 days after it's received -nothing can stop an insurer from contesting the validity of the policy on the grounds of fraud
Replacement annuities have a free look period of...
-45 days with same insurer -20 days with different insurer
If a telemarketer wants to make an unsolicited sales call to a potential customer, what is the earliest time the telemarketer can call the prospect's residence? -7 am -8 am -9 am -Noon
-8 am Permissible calling hours for telemarketers are between 8am and 9pm.
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? -Policy Summary -Illustrations -Buyer's Guide -Insurance Index
-Buyer's Guide The Buyer's Guide is a consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process. It is a generic guide that does not address the specific policy of the insurer, instead explaining life insurance in a way that the average consumer can understand.
Which of the following would NOT be considered an exception to the National Do Not Call List? -Calls based from outside of the United States -Calls for which the consumer has given prior written permission -Calls which are not commercial or do not include unsolicited advertisements -Calls by or on behalf of tax-exempt nonprofit organizations
-Calls based from outside of the United States Calls from outside the United States are not an exception to the National Do Not Call List.
A producer agent must do all of the following when delivering a new policy to the insured EXCEPT -Collect any premium due. -Explain the rating procedures if the policy is rated differently than applied for. -Disclose commissions earned from the sale of the policy. -Explain the policy provisions, riders, and exclusions.
-Disclose commissions earned from the sale of the policy. A producer must explain policy provisions, exclusions, and riders at the time of delivery, as well as the rating procedures, especially if the policy is rated differently than applied for. The producer must also collect any due premium and have the insured sign the statement of continued good health.
What is the purpose of a conditional receipt? -It serves as proof that the agent has determined the applicant to be fully insurable for coverage by the insurance company. -It is given by the agent only to applicants who fully prepay all scheduled premiums in advance of policy issue. -It is intended to provide coverage on a date earlier than the date of the issuance of the policy. -It guarantees the applicant that a policy will be issued in the amount applied for in the application.
-It is intended to provide coverage on a date earlier than the date of the issuance of the policy. Coverage commences on the date of the application or the date of a medical examination, whichever is later, on the condition that the applicant is determined to be insurable at the rate applied for.
What was created to keep telemarketers from calling consumers who do not wish contacted? -Freedom of Information Act -Call Control Registry -National Do Not Call Registry -Confidential No Call Act
-National Do Not Call Registry The National Do Not Call Registry was created to allow consumers the choice to not be contacted by telemarketers.
A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will -Pay the policy proceeds up to an established limit. -Not pay the policy proceeds under any circumstances. -Automatically pay the policy proceeds. -Pay the policy proceeds only if it would have issued the policy.
-Pay the policy proceeds only if it would have issued the policy. The conditional receipt says that coverage will be effective either on the date of the application or the date of the medical exam, whichever occurs last, as long as the applicant is found to be insurable as a standard risk, and policy is issued exactly as applied for.
Which of the following will be included in a policy summary? -Comparisons with similar policies -Primary and secondary beneficiary designations -Premium amounts and surrender values -Copies of illustrations and application
-Premium amounts and surrender values A policy summary must be delivered along with the policy and will provide the producer's name and address, the insurance company's home office address, the generic name of the policy issued, and premium, cash value, surrender value and death benefit figures for specific policy years.
Which is the appropriate action by the insurer if a prospective insured submitted an incomplete application? -Issue a policy anyway since the application has been submitted -Ask the producer who solicited the policy to complete and resign the application -Fill in the blanks to the best of the insurer's knowledge -Return the application to the applicant for completion
-Return the application to the applicant for completion Any unanswered questions need to be answered before the policy is issued. If the insurer receives incomplete applications, they need to be returned to the applicants for completion.
An applicant signs an application for a $25,000 life insurance policy, pays the initial premium, and receives a conditional receipt. If the applicant is killed in an automobile accident the next day, -The company could reject the application on the basis that the insured's death was not caused by an ongoing medical problem. -The beneficiary would receive $25,000 if it was determined that the insured qualified for the policy applied for. -The premium would be returned to the insured's estate because the policy was not issued. -The company could reject the death claim because the underwriting process was never completed.
-The beneficiary would receive $25,000 if it was determined that the insured qualified for the policy applied for. The conditional receipt provides that when the applicant pays the initial premium, coverage is effective on the condition that the applicant proves to be insurable either on the date the application was signed or the date of the medical examination, if one is required.
Suitability is determined by information provided by the applicant regarding:
-insurance and investment objectives -financial stability and needs
A person who does not lock the doors to his or her house shows an indifferent attitude. This person present what type of hazard?
Morale
Why should the producer personally deliver the policy when the first premium has already been paid? -To find out how the family has been doing since the initial presentation -To make sure the policy is not stolen or lost -To help the insured understand all aspects of the contract -To ensure the producer gets paid commission
-To help the insured understand all aspects of the contract It is the producer's responsibility to make sure that the policy is understood by the insured and all of their questions are satisfied, and the delivery receipt is signed.
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 submits the application to the company and the company issues a conditional receipt -When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health -On the designated effective date -On the application date
-When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health If the initial premium is not paid with the application, the agent will be required to collect the premium at the time of policy delivery. In this case, the applicant will most likely need to fill out a Statement of Good Health.
A basic illustration must include:
-a brief description of the policy being illustrated -a brief description of the premium outlay for the policy -a brief description of any policy features, riders, or options shown and the impact they may have on the benefits and values of the policy -identification and a brief definition of column headings and key terms
A provider or broker of a viatical must provide this to the viator
-a brochure describing the viatical settlement process -the compensation amount -the calculation method
Record retention
-a copy of an illustration used in the sale of life insurance must be signed and submitted to the insurer at the time of application -a copy must also be provided to the applicant -if a policy is issued other than applied for, a revised basic illustration must be sent -all must be retained by the insurer until 3 years after the policy is no longer in force
Separate accounts
-a domestic insurer issuing variable life insurance must establish one or more separate accounts -a person with access to the cash must be bonded for $100,000 -assets of separate accounts will be valued at least monthly
The viator must consent in writing to the release of their medical records to...
-a viatical settlement provider -a viatical settlement broker -the insurance company that issued the life insurance policy covering the life of the insured all records must remain confidential
A provider or broker must provide a viator with these disclosures in a viatical settlement application
-alternatives to viatical settlement contracts include accelerated death benefits or policy loans -some or all of the viatical settlement proceeds may be taxable, obtain a professional tax advisor's assistance -proceeds of the viatical settlement could be subject to creditor claims -proceed receipts may adversely affect the viator's eligibility for medicaid or other government benefits, obtain advice from the appropriate agency -the viator has the right to rescind the viatical settlement contract for 15 days after receipt to the proceeds, if the viator dies in that period the contract is considered rescinded -proceeds will be paid within 3 business days of when the viatical settlement provider has received notice that the policy has been transferred and the beneficiary designated -entering into a viatical settlement contract may cause various rights under the insurance contract to be forfeited, advice should be sought from a financial advisor -all medical, financial, or personal information obtained by a provider or broker may be disclosed as necessary, the viator must consent to the disclosure -all information provided by the viator will be shared with the insurer that issued the policy
Conversion from group to individual life insurance
-an insured is eligible to convert without proof of insurability for an amount of time specified in the policy -no matter how long this time period is, the insured must be given a notice at 15 days prior to the expiration date of conversion
Accelerated living benefit provision rider's conditions for payment:
-due to a medically determinable condition, the insured's life expectancy is expected to be 6 months or less (12 months if specified in the policy) -the insured suffers from a medical condition that would result in death in 6 months or less in the absence of treatment (12 months if specified in the policy) -a total and permanent disability prevents the insured from performing any work for pay or profit for a period of time up to 12 months -a disability prevents the insured from engaging in the duties of an occupation for a period of time up to 12 months -the insured is expected to remain confined to an eligible health care facility for their entire lifetime IN ALL CASES THE MAXIMUM TIME FOR AN ACCELERATED DEATH BENEFIT IS 12 MONTHS
The following must be included in a life insurance policy
-entire contract: policy plus signed application -right to examine (free look): individual policy is 10 days, replacing policy with same insurer is 45 days, replacing policy with different insurer is 20 days -payment of premiums: all premiums are payable in advance -grace period: 30 days or 1 month -reinstatement: 3 years -incontestability: 2 years from issue
Variable annuities state that no sale, exchange, or other transfer of assets may be made between separate accounts except when:
-establishing a separate account -conducting separate account business for a variable annuity or variable accumulation annuity contract -making changes for mortality experience or expense costs -transferring any amount in excess of the reserve liability held in the separate account
Producer responsibilities for advertising
-every insurer must maintain a file containing every advertisement it uses -must be kept for 4 years -certificate of compliance must be annually filed stating insurers are, to the best of their knowledge, following the advertising laws
Standards for basic illustrations
-guaranteed death benefits and values must be shown and labeled "guaranteed" -any non-guaranteed elements may not be based on a scale more favorable to the policy owner that the insurer's illustrated scale and must be clearly defined "nonguaranteed" -guaranteed benefits must be shown before corresponding nonguaranteed elements -illustration of nonguaranteed elements must indicate the benefits and values are not guaranteed
Illustrations must contain the:
-insurer's name -date the illustration was prepared for the proposed insurance -name and business address of the producer -underwriting or rating classification which the illustration is based upon -generic name of policy and form number -initial death benefit -dividend option election, or application, of any applicable non-guaranteed elements
Prohibited provisions of life insurance policies
-payment of claims: policy become a claim after death of insured and settlement must be made after proof of death is received -backdating: allowed up to 6 months -time for legal action: insured must be able to take legal action for at least 2 years (if not more)
Insurers or producers must not:
-represent the policy as anything but a life insurance policy -indicate that the payment or amount of non-guaranteed elements is guaranteed -use an illustration that at any point projects policy performance to be better than actual performance -use the term "vanish" or "vanishing premium" to imply that the policy becomes paid up using non-guaranteed elements as a portion of future premiums -use interest rates that are greater than the company's current earned interest rate in determining illustrated non-guaranteed elements
Punishments for unfair discrimination
-suspension or revocation of the license -refusal to issue a new license for up to 1 year -imposition of a penalty of up to $500 per violation
Standards of suitability must specify:
-that no recommendation can be made to an applicant to purchase a variable life insurance policy -that no variable life insurance policy can be issued if there are no reasonable grounds to believe that purchasing the policy is in the applicant's best interest
Viatical settlement providers must conspicuously disclose in the contract or separate document signed by the viator and provider...
-the affiliation between the provider and the issuer of the viaticated policy -the provider's name, address, and telephone number -if a joint policy, coverage on other lives may be lost, consult with the insurance producer or the insurer issuing the policy -the current death benefit dollar amount payable to the provider -the name, business address, and telephone number of the independent third party escrow agent -the viator or owner may inspect relevant documents
Life insurance disclosure statements must make clear:
-the amount of coverage and benefits offered -that the disclosure is for the insured's protection, provides basic information about costs and coverages, and should be read carefully -that the disclosure may not be considered as an offer to contract or to modify any policy or rider that might be issued -information about the basic policy, rider, or supplemental benefit built into the policy -the separate premiums for each basic policy and rider -if dividends are payable -that a surrender comparison index will be provided upon delivery of the policy
Delivery receipt requirement
-when a producer hand delivers an individual life policy or annuity a delivery receipt is required, stating the date received -when delivered by a different method than hand delivery a mailing certificate is adequate proof of delivery
Notice to insurer (viatical settlement)
-within 20 days after a viatical agreement has been reached, the viatival settlement provider must give written notice to the insurer that issued the policy that policy has or will become viaticated policy -if the viator is terminally or chronically ill the notice must be accompanied by a written statement from the viator as required
Variable annuity characteristics
1) Underlying Investment - the payments that annuitant makes into the varibe annuity are invested in the insurers separate account not their general account. 2)Interest Rates - issuing insurance company does not guarantee a minimum interest rate. 3) License Requirements - a variable annuity is considered a security and is regulated by the securities exchange commission in addition to state insurance regulations.
13. Which type of authority is based on the actions, words, or deeds of the principal?a)Apparent b)Express c)Lingering implied d)Implied
1. Apparent Apparent authority is the appearance of, or the assumption of, authority based on the actions, words, or deeds of the principal or because of circumstances the principal created.
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
1. The period of time during which accumulated money is converted into income payments
1.Which of the following best describes what the "annuity period" is? (Choose from the following options) 1. The period of time during which accumulated money is converted into income payments 2. The period of time spanning from the accumulation period to the annuitization period 3. The period of time during which money is accumulated in an annuity 4. The period of time spanning from the effective date of the contract to the date of its termination
a)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.
10. Which of the following is NOT true regarding Equity Indexed Annuities? a)They earn lower interest rates than fixed annuities b)The insurance company keeps a percentage of the returns c)They have guaranteed minimum interest rates d)They are less risky than variable annuities.
d)Increases annually.
11. Annually renewable term policies provide a level death benefit for a premium that a)Decreases annually b)Remains level c)Fluctuates d)Increases annually. Annually renewable term policies provide a level death benefit for a premium that increases each year with the age of the insured.
1. Twisting
11.Agents who induce insureds to drop a policy in favor of another policy when it might not be in the insured's best interest to do so are guilty of (Choose from the following options) 1. Twisting 2. Defamation 3. Misrepresentation 4. Rebating
3. It provides income the beneficiary cannot outlive
12.Which of the following is true regarding a single life settlement option? (Choose from the following options) 1. Proceeds are paid out in a lump sum 2. It provides income for a specified period of time 3. It provides income the beneficiary cannot outlive 4. Payments continue until the entire principal is exhausted.
1. Apparent
13. Which type of authority is based on the actions, words, or deeds of the principal?a)Apparentb)Expressc)Lingering impliedd)Implied Apparent authority is the appearance of, or the assumption of, authority based on the actions, words, or deeds of the principal or because of circumstances the principal created.
3. Both a life insurance license and a securities license
13.What license or licenses are required to sell variable annuities? (Choose from the following options) 1. Only a securities license 2. No license is required 3. Both a life insurance license and a securities license 4. Only a life insurance license
2. Transfer
14. When a homeowner purchases insurance on his home, what risk management technique is he practicing?a)Retentionb)Transferc)Avoidanced)Sharing When insurance is purchased, the insured is, in return for the payment of the premium, transferring the risk of financial loss by certain perils to the insurance company.
4. Revocable beneficiary.
14.Bonnie wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. Bonnie should have her husband named as the (Choose from the following options) 1. Secondary beneficiary 2. Tertiary beneficiary 3. Irrevocable beneficiary. 4. Revocable beneficiary.
d)They are expensive to administer. The major disadvantage of trusts is that they are expensive to administer.
16. What is a major problem with naming a trust as the beneficiary of a life insurance policy? a)The insurance company will not pay the proceeds to a nonliving beneficiary. b)It is illegal to name a trust as the beneficiary. c)The insured must have the Superintendent's permission to name a trust as the beneficiary. d)They are expensive to administer
2. Warranty
17.Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract? (Choose from the following options) 1. Representation 2. Warranty 3. Concealment 4. Indemnity
4. Apply and pay a fee to a nonresident state that reciprocates.
18.In order to get a nonresident license is this state, producers must (Choose from the following options) 1. Pass the non-resident state exam and satisfy their continuing education requirements 2. Represent an agency located in this state 3. Surrender their licenses in their state of residence 4. Apply and pay a fee to a nonresident state that reciprocates.
4. The annuitant will receive the higher of either the guaranteed minimum rate or current rate.
19.In a fixed annuity, which of the following is true regarding the guaranteed interest rate on the investment? (Choose from the following options) 1. The annuitant will always receive the current interest rate. 2. The annuitant will receive the lower of either the guaranteed minimum rate or current rate. 3. The annuitant will only receive the guaranteed minimum specified in the contract. 4. The annuitant will receive the higher of either the guaranteed minimum rate or current rate.
4. An application on which the medical information is completed by the applicant and the agent only
2.Which of the following would be considered a nonmedical insurance application? (Choose from the following options) 1. An application that does not ask any questions about the applicant's medical history 2. An agent's report 3. An application for life insurance 4. An application on which the medical information is completed by the applicant and the agent only
4. Apparent
20.An agent accepts the premium payment 35 days after it is due, telling the insured that there will not be a problem keeping the policy in force. This is an example of what type of agent authority? (Choose from the following options) 1. Express 2. Implied 3. Assumed 4. Apparent
3. Cash value
21.What limits the amount that a policyowner may borrow from a whole life insurance policy? (Choose from the following options) 1. Amount stated in the policy 2. Face amount 3. Cash value 4. Premiums paid
2. 30 days
22.A flexible premium universal life insurance policy must provide a grace period of (Choose from the following options) 1. 10 days. 2. 30 days. 3. 60 days. 4. 90 days.
4. Agent
23.According to the Law of Agency, a principal is represented by a/an (Choose from the following options) 1. Insurer 2. Broker 3. Insured 4. Agent.
a)Pay dividends to the policyowner A participating insurance policy will pay dividends to the owner based upon actual mortality cost, interest earned and costs.
24. A participating insurance policy may do which of the following? a)Pay dividends to the policyowner b)Provide group coverage c)Pay dividends to the stock holder d)Require 80% participation
4. Increases annually
24.Annually renewable term policies provide a level death benefit for a premium that (Choose from the following options) 1. Decreases annually. 2. Remains level 3. Fluctuates 4. Increases annually.
c)The board of directors is chosen by a state-based election board In a stock company, the board of directors is elected by the stockholders.
25. All of the following attributes are found in stock insurance companies EXCEPT a)Earnings from operations may be kept as retained earnings b)The Stockholders may receive a dividend at the end of the year c)The board of directors is chosen by a state-based election board d)The company is owned by the stockholders. In a stock company, the board of directors is elected by the stockholders.
4. The surviving beneficiary will continue receiving this 2/3 of the benefit paid when both beneficiaries were alive.
25.An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries? (Choose from the following options)1. The beneficiary will receive 2/3 of the lump sum up front, and the remaining 1/3 will be paid over time.2. The beneficiary will receive 2/3 of the total benefit, with the final 1/3 payable when the first beneficiary dies.3. One of the beneficiaries will receive 1/3 and the other 2/3 of the proceeds when the insured dies.4. The surviving beneficiary will continue receiving this 2/3 of the benefit paid when both beneficiaries were alive.
4. An unfair trade practice.
26.If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association that would be considered (Choose from the following options) 1. A misrepresentation 2. An accurate statement 3. A legal representation of the Association 4. An unfair trade practice.
d)Apparent 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.
27. An agent accepts the premium payment 35 days after it is due, telling the insured that there will not be a problem keeping the policy in force. This is an example of what type of agent authority?a)Express b)Implied c)Assumed d)Apparent
a)Option A Under Option A, the death benefit remains level while the cash value gradually increases. The death benefit will increase at a later date in order to maintain a gap between the cash value and the death benefit before the policy matures.
28. Which Universal Life option has a gradually increasing cash value and a level death benefit? a)Option A b)Juvenile life c)Term insurance d)Option B
3. It has a guaranteed minimum interest rate
28.Why is an equity indexed annuity considered to be a fixed annuity? (Choose from the following options) 1. It has a fixed rate of return 2. It is not tied to an index like the S&P 500 3. It has a guaranteed minimum interest rate 4. It has modest investment potential.
3. Increase medical requirements on existing members
29.If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may (Choose from the following options) 1. Require a higher premium 2. Prolong the open enrollment period 3. Increase medical requirements on existing members 4. Require evidence of insurability.
An insurance company forwards fixed annuity premiums to their general account, where the money is invested. he guaranteed minimum interest is set at 3%. During an economic downswing, the investments only drew 2.5%. What interest rate will the insurer pay to its policyholder?
3%
d)Warranty A warranty in 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. Representations are statements that are true to the best of the applicant's knowledge.
3. Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?a)Concealment b)Indemnity c)Representation d)Warranty
2. Investing in the stock market.
3.All of the following actions by a person could be described as risk avoidance EXCEPT (Choose from the following options) 1. Taking a flu shot each year 2. Investing in the stock market. 3. Refusing to scuba dive 4. Never flying in an airplane.
Should the Commissioner request information from a certificate holder, licensee, or other person under the jurisdiction of the Commissioner...If no time specified, they must comply within
30 days State law provides that if a time is not specified, the person shall comply with the request within 30 days and shall provide all documents over to the Commissioner has requests
3. LEVEL
30.A man wants to buy a life insurance policy in which he can count on guaranteed minimum benefits. Which type should he buy? (Choose from the following options) 1. Solid 2. Fixed 3. Level 4. Variable
3. Apparent Authority
31.The authority granted to an agent through the agent's contract is referred to as (Choose from the following options) 1. Absolute Authority 2. Express Authority 3. Apparent Authority 4. Implied Authority.
3. Until the beneficiary's death
32.How long will the beneficiary receive payments under the single life settlement option? (Choose from the following options) 1. For a specified period of time 2. Until the insured's age 100 3. Until the beneficiary's death 4. Until the insured's death
1. It is a level term insurance
32.Which of the following best describes annually renewable term insurance? (Choose from the following options) 1. It is a level term insurance 2. It requires proof of insurability at each renewal 3. Neither the premium nor the death benefit is affected by the insured's age. 4. It provides annually increasing death benefit.
1. An index like Standard & Poor's 500
33.The equity in an equity index annuity is linked to (Choose from the following options) 1. An index like Standard & Poor's 500 2. The returns from the insurance company's separate account 3. The annuitant's individual stock portfolio 4. The insurance company's general account investments.
2. The surrender value should be equal to 100% of the premium paid, minus any prior withdrawals and surrender charges
34.A deferred annuity is surrendered prior to annuitization. Which of the following best describes the nonforfeiture value of the annuity? (Choose from the following options) 1. The surrender value will not be more than 80% of the cash value in the annuity at the time of surrender 2. The surrender value should be equal to 100% of the premium paid, minus any prior withdrawals and surrender charges 3. A deferred annuity cannot be surrendered prior to annuitization. The owner must wait until the annuitization period begins to receive any payments 4. The surrender value will be based on current interest rates.
4. Only the annuity owner If the need arises, a deferred annuity contract may be surrendered only by the annuity owner. At surrender the owner receives the value of the annuity minus a surrender charge.
38.Which of the following can surrender a deferred annuity contract? (Choose from the following options) 1. Only the insurance company for nonpayment of premiums 2. The beneficiary after the owner's death 3. Deferred annuity cannot be surrendered 4. Only the annuity owner
4. Misrepresentations Making false or misleading statements with the intent to defraud another is misrepresentation.
39.A producer who omits a statement which may mislead or deceive the persons addressed has committed (Choose from the following options) 1. Defamation 2. Twisting 3. Coercion 4. Misrepresentation.
3. A mutual insurer
4.Insurance companies may be classified according to the legal form of their ownership. The type of company organized to return any surplus money to their policyholders is (Choose from the following options) 1. A fraternal insurer 2. A stock company 3. A mutual insurer 4. A reciprocal company.
2. Reciprocity
43.A producer in Ohio wants to become a producer in Michigan. The Department will waive certain examination requirements, provided that Ohio would waive these same requirements if a Michigan producer sought licensure in Ohio. What term is used to describe this phenomenon? (Choose from the following options) 1. Equanimity 2. Reciprocity 3. Equality 4. Fair exchange
b)Option B
44. Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? a)Option A b)Option B c)Corridor option d)Variable option Under Option B the death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases. At any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value.
4)The illustration must stay exactly as it is. If an agent uses the illustrations of an insurer, it must first be approved, and the agent may not alter the illustrations in any way.
44.An agent wants to include an illustration written by his insurance company. Which of the following best describes the conditions under which he may use the illustration? (Choose from the following options) 1. The illustration can only be used for a month before it requires re-approval 2. Illustrations must accurately portray what would be included in a potential contract 3. All changes must be submitted to the insurer before approval 4. The illustration must stay exactly as it is.
a) It may last for the lifetime of the annuitant or for a shorter period of time.
46. Which of the following is true regarding the annuity period? a)It may last for the lifetime of the annuitant or for a shorter period of time. b)During this period of time the annuity payments grow interest tax deferred. c)It is also referred to as the accumulation period. d)It is the period of time during which the annuitant makes premium payments into the annuity. The "annuity period" is the time during which accumulated money is converted into an income stream. It may last for the lifetime of the annuitant or for a shorter specified period of time depending on the benefit payment option selected.
3. Automatic premium loan
46.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? (Choose from the following options) 1. Incontestability period 2. Assignment 3. Automatic premium loan 4. Waiver of premium
1. 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
46.Which of the following is NOT true regarding Equity Indexed Annuities? (Choose from the following options) 1. They earn lower interest rates than fixed annuities 2. The insurance company keeps a percentage of the returns 3. They have guaranteed minimum interest rates 4. They are less risky than variable annuities.
c)A copy of the original application for insurance.
47. To meet the Entire Contract provision, a policy must contain a)Buyer's guide to life insurance b)Listing of the insured's former insurer(s) for incontestability provisions c)A copy of the original application for insurance d)A declarations page with a summary of insureds. An insurance contract must contain a copy of the original application.
2. The policyowner can specify the way proceeds are split in the policy
47.The owner of a life insurance policy wishes to name two beneficiaries for the policy proceeds. What will the soliciting insurance producer say? (Choose from the following options) 1. The proceeds will be split evenly between the two beneficiaries 2. The policyowner can specify the way proceeds are split in the policy 3. The way proceeds are split between beneficiaries is decided by which type of policy is chosen 4. Life insurance policies may have only one beneficiary.
d)A new Commissioner or Director is put into office.
48. All of the following events will terminate a producer's certificate of appointment EXCEPT a)A producer's license expires and is not renewed. b)A termination issued by the appointing insurer. c)A producer's license is suspended or revoked by the Department of Insurance. d)A new Commissioner or Director is put into office. An appointment by an insurer is based upon the person maintaining a valid insurance license. Although the appointment is made by the head of the Insurance Department, that person leaving the office does not terminate existing appointments.
4. A new Commissioner or Director is put into office. An appointment by an insurer is based upon the person maintaining a valid insurance license. Although the appointment is made by the head of the Insurance Department, that person leaving the office does not terminate existing appointments.
48. All of the following events will terminate a producer's certificate of appointment EXCEPTa)A producer's license expires and is not renewed.b)A termination issued by the appointing insurer.c)A producer's license is suspended or revoked by the Department of Insurance.d)A new Commissioner or Director is put into office. An appointment by an insurer is based upon the person maintaining a valid insurance license. Although the appointment is made by the head of the Insurance Department, that person leaving the office does not terminate existing appointments.Next
2. Option B
5.Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? (Choose from the following options) 1. Option A 2. Option B 3. Corridor option 4. Variable option
What is the penalty for excessive contributions to an IRA?
6%
3. 3%
6.An insurance company forwards fixed annuity premiums to their general account, where the money is invested. The guaranteed minimum interest is set at 3%. During an economic downswing, the investments only drew 2.5%. What interest rate will the insurer pay to its policyholders? (Choose from the following options) 1. 3% regardless of what the investment draws since that's the guaranteed rate 2. 2.5% 3. 3% 4. 3% this payment. The overpayment this time will be subtracted from the next time the rate exceeds 3%.
b
All of the following are true regarding insurance policy loans EXCEPT a. The policy will terminate if the loan plus interest equals or exceeds the cash value of the policy. b. Policy loan can be made on policies that do not accumulate cash value.
4. Reduction
7.Following a career change, an insured is no longer required to perform many physical activities, so he has implemented a program where he walks and jogs for 45 minutes each morning. The insured has also eliminated most fatty foods from his diet. Which method of dealing with risk does this scenario describe? (Choose from the following options) 1. Transfer 2. Avoidance 3. Retention 4. Reduction
b
A 30-year-old insured has suffered from asthma ever since he was a child. He is applying for individual insurance. What kind of coverage will this individual most likely receive for asthma-related loss, during the initial months of his policy? a. 50% b. 0%
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
a
A deferred annuity is surrendered prior to annuitization. Which of the following best describes the nonforfeiture value of the annuity? a. The surrender value should be equal to 100% of the premium paid, minus any prior withdrawals and surrender charges. b. A deferred annuity cannot be surrendered prior to annuitization. The owner must wait until the annuitization period begins to receive any payments.
a
A health insurance plan which involves financing, managing, and delivery of health care services and involves a group of providers who share in the financial risk of the plan or who an incentive to deliver cost of effective service, is called a. managed care plan b. self-insurer
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..
b
A medical insurance plan in which the health care provider is paid a regular fixed amount for providing care to the insured and does not receive additional amounts of compensation dependent upon the procedure performed is called a. Indemnity plan. b. prepaid plan
a
A participant contributes more than the maximum amount to her Roth IRA. What kind of tax penalty will he or she have to pay? a. 6% b. 10%
What is the market value adjustment in modified guaranteed annuities?
A percentage of the difference between the contracted rate of interest in the annuity and the current rate at surrender
What is a blackout period for social security benefits?
A period of time during which the surviving spouse does not receive benefits
b
A provision in a life insurance policy that provides for the early payment of some portion of the policy face amount should the insured suffer from a terminal illness or injury is called a. Automatic premium loan provision b. Accelerated Benefit provision
b
A rider attached to a life insurance policy that provides coverage on the insured's family members is called the a. payor rider b. other-insured rider
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.
According to the Law of Agency, a principal is represented by whom?
Agent or producer.
What are the four elements of an insurance contract?
Agreement (offer and acceptance), consideration, competent parties, and legal purpose.
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
What type of insurer is formed under the laws of another country?
Alien
a
All of the following are characteristics of group life insurance EXCEPT a. premiums are determined by the age, sex, and occupation of each individual certificate holder b. amount of coverage is determined according to nondiscriminatory rules
a
All of the following are covered by Part A of Medicare EXCEPT a. physician and surgeon services b. in-patient hospital services
a
All of the following are true regarding a decreasing term policy EXCEPT a. The payable premium amount steadily declines throughout the duration of the contract. b. The contract pays only in the event of death during the term and there is no cash
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.
a
All other factors being equal, the least expensive first-year premium payment is found in a. Annually Renewable Term. b. Increasing Term.
b
All other factors being equal, the least expensive first-year premium payment is found in a. Increasing Term. b. annually renewable term
1. Annually Renewable Term
All other factors being equal, the least expensive first-year premium payment is found ina)Annually Renewable Term.b)Increasing Term.c)Decreasing Term.d)Level 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.
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
a
An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called? a. profit sharing plan b. 401(k) plan
4) Nothing, due the insured's reaching the maximum age.
An employer provides a group life plan for its employees; it is $50,000 of term to age 65. When one of the employees was hired 10 years ago, he misstated his age and told the employer he was 50, when in fact he was 56 years old. The insured employee died last week. His beneficiary will receive (Choose from the following options)1. The amount of death benefit the premium would have purchased at his correct age.2. Nothing, due to the misstatement of age.3. $50,000.4. Nothing, due the insured's reaching the maximum age.
An employer provides a group life plan for its employees; it is $50,000 of term to age 65. When one of the employees was hired 10 years ago, he misstated his age and told the employer he was 50, when in fact he was 56 years old. The insured employee died last week. His beneficiary will receive (Choose from the following options) 1. The amount of death benefit the premium would have purchased at his correct age. 2. Nothing, due to the misstatement of age. 3. $50,000. 4. Nothing, due the insured's reaching the maximum age.
An employer provides a group life plan for its employees; it is $50,000 of term to age 65. When one of the employees was hired 10 years ago, he misstated his age and told the employer he was 50, when in fact he was 56 years old. The insured employee died last week. His beneficiary will receive (Choose from the following options)1. The amount of death benefit the premium would have purchased at his correct age.2. Nothing, due to the misstatement of age.3. $50,000.4. Nothing, due the insured's reaching the maximum age.
2. Waiver
An insurance company receives an application with some information missing and issues the policy anyway. What is this called? (Choose from the following options) 1. Aleatory 2. Waiver 3. Estoppel 4. Subrogation
a
An insured has a Level Term Life Insurance policy that is guaranteed renewable and also includes a reentry provision. The reentry provision would allow the insured to renew the policy and a. Pay a lower renewal premium by proving insurability. b. Change the type of insurance by proving insurability.
a
An insured has a Level Term Life Insurance policy that is guaranteed renewable and also includes a reentry provision. The reentry provision would allow the insured to renew the policy and a. Pay a lower renewal premium by proving insurability. b. Pay a lower renewal premium without evidence of insurability.
a
An insured has a major medical policy with a $500 deductible and 80/20 coinsurance. The insured is hospitalized and sustains a $2,500 bill. What is the maximum amount that the insured will have to pay? a. $900 b. $500
a
An insured has a major medical policy with a $500 deductible and 80/20 coinsurance. The insured is hospitalized and sustains a $2,500 bill. What is the maximum amount that the insured will have to pay? a. $900 b. $500
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 been injured in an accident. Although he is still receiving benefits from his disability income policy, he does not have to pay premiums. This means that the policy includes a. Return of premium rider. b. Waiver of premium feature
a
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? a. Pay a reduced death benefit b. Pay the full death benefit
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 is scheduled to have two cavities filled. He knows in advance what benefits will be paid for the procedure. Which clause is responsible for the advanced notification? a. Prior authorization b. Scheduled Benefits
a
An insured pays $1,200 annually for her life insurance premium. The insured applies this year' s $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What option does this describe? a. Reduction of Premium b. Cash option
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
a
An insured receives an annual life insurance dividend check. What term best describes this arrangement? a. Cash option b. accumulation at interest
a
An insured replaced an existing policy with a Medicare Supplement policy. He subsequently decided to cancel the policy, but is unsure whether or not a free look provision applies. He could find this information a. In the "Notice Regarding Replacement." b. In the application.
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
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 was in compliance with the policy requirements regarding claims. b. The claim most likely will not be paid since the official claims form was not submitted.
a
An insurer is helping a married couple determine their children's needs, assets, and liabilities in the event that one or both of the spouses should die. What is the term most closely associated with this? a. survivor protection b.survivorship insurace
1. Fraternal insurer
An organization that, in addition to other activities, provides a formal insurance plan to its members is classified as a (Choose from the following options) 1. Fraternal insurer 2. Mutual company 3. Stock company 4. Reciprocal association.
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.
b
Andy the producer violates the Insurance Code very intentionally, in order to substantially increase his commissions. How much would he likely be penalized? a. $1000 b. $25,000
When an annuity is written, whose life expectancy is taken into account?
Annuitant
Your client plans to retire at age 50. He would like to purchase an annuity that would provide income from the time he retires to the age when social security and other pension funds become available. What settlement potion should he consider?
Annuity certain which allows the annuitant to select the time period or the amount for the benefits
b
Another name for a substandard risk classification is a. elevated b. rated
A person who does not lock the doors to his/her house show an indifferent attitude. This person presents what type of hazard?
Morale
Which of the following is a term for a person who seeks insurance from an insurer? Beneficiary Applicant Agent Insured
Applicant The applicant is the person who is seeking insurance from an insurer.
In general terms, IRA contributions
Are tax deductible
THe full premium was submitted with the app for life insurance, and the policy was issued two weeks later as requested. When does coverage become effective?
As of the application date. If the full premium was submitted with the application and the policy was issued as requested, the policy coverage effective date would generally coincide with the date of application
What is NOT true regarding a qualified annuity?
At distribution, all amounts received by the employee are tax free
When must the policy summary for a life insurance policy be delivered to the policy owner?
At the time of policy delivery
a
Mortality - Interest + Expense = a. Gross premium b. net premium
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
Which of the following is true regarding the annuity period? a)It is also referred to as the accumulation period. b)It is the period of time during which the annuitant makes premium payments into the annuity. c)It may last for the lifetime of the annuitant or for a shorter period of time. d)During this period of time the annuity payments grow interest tax deferred.
C. It may last for the lifetime of the annuitant or for a shorter period of time. The "annuity period" is the time during which accumulated money is converted into an income stream. It may last for the lifetime of the annuitant or for a shorter specified period of time depending on the benefit payment option selected.
b
Certain conditions, such as dismemberment or total and permanent blindness, will automatically qualify the insured for full disability benefits. Which disability policy provision does this describe? a. partial disability b. presumptive disability
A state-issued document empowering an insurance company to become an admitted insurer is called what?
Certificate of Authority
In order to transact insurance within a given state, an alien insurer must first obtain what?
Certificate of Authority
What document is required for an insurance company to transact insurance?
Certificate of Authority
A state-issued document empowering an insurance company to become an admitted insurer is called what?
Certificate of authority
a
Concerning insurance, the definition of a fiduciary responsibility is a. Handling insurer funds in a trust capacity. b. Commingling premiums collected with agent's personal funds.
a
Concerning insurance, the definition of a fiduciary responsibility is a. Handling insurer funds in a trust capacity. b. Handling assets or money belonging to others.
In reference to fixed annuities, what comprises most of a life insurance company's general account?
Conservative investments like bonds.
a
Controlled business must not exceed what portion of a producer's transactions? a. 25% b. 50%
Which of the following is NOT a legitimate use of annuities by business?
Creating a tax shelter
Which of the following is NOT an example of insurable interest? Business partners in each other Employer in employee Child in parent Debtor in creditor
Debtor in creditor The three recognized areas in which insurable interest exists are as follows: a policyowner insuring his or her own life, the life of a family member (relative or spouse), or the life of a business partner, key employee, or someone who has a financial obligation to them. A debtor does not have an insurable interest in the creditor.
Insurers are classified according to their domicile. What are the three types of insurers?
Domestic, foreign, and alien.
b
During partial withdrawal from a universal life policy, which portion will be taxed? a. principal b. interest
b
During replacement of life insurance, a replacing insurer must do which of the following? a. Send a copy of the Notice Regarding Replacement to the Department of Insurance b. Obtain a list of all life insurance policies that will be replaced
At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy?
Either on the date of application of the date of the medical exam (whichever occurs last)
b
Existing and replacing life insurers are required to keep copies of all summaries, notices, and statements used in sales transactions until the conclusion of their next examination by the Insurance Department, or for a period of at least a. 2 years b. 5 years
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
Under which installments option does the annuitant select the amount of each payment and the insurer determines how long they will pay benefits?
Fixed amount
b
Fixed annuity contract provides for a. protection from inflation b. level benefit payments
4) Reduction
Following a career change, an insured is no longer required to perform many physical activities, so he has implemented a program where he walks and jogs for 45 minutes each morning. The insured has also eliminated most fatty foods from his diet. Which method of dealing with risk does this scenario describe? (Choose from the following options) 1. Transfer 2. Avoidance 3. Retention 4. Reduction
An insurance company is domiciled in California and transacts insurance in Nevada. What is this insurer's classification in Nevada?
Foreign
An insurance company that is formed under the laws of another state is known as what type of insurer?
Foreign
an insurance company is domicled in Califrnia and transacts insurance in Nevada. What is this insurer's classification in Nevada?
Foreign
What type of insurer is a voluntarily formed organization that provides insurance benefits for members of an affiliated lodge or religious organization with a representative form of government?
Fraternal insurer
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
What type of policy is typically issued without proof of inscrutability from the insured?
Group policy
What type of policy issues certificates of insurance to the insureds?
Group policy
Fixed Annuity features
Guaranteed minimum rate of interest to be credited to the purchase payments Income payments that do not vary from one payment to the next The insurance company guarantees the specified dollar amount for each payment and the length of the period of payments as determined by the settlement option chosen by the annuitant.
Conditions that increase the chance of a loss are known as what?
Hazards
a
How are funds contributed to a tax-sheltered annuity treated for taxation? a. The contributions are not included as income for the employee, but are taxable upon distribution. b. The contributions are never taxed.
b
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.
a
How is emergency care covered for a member of an HMO? a. A member of an HMO can receive care in or out of the HMO service area, but care is preferred in the service area b. 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
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.
a
How long must an insurer retain an advertisement for its long-term care policies? a. 3 years b. 5 years
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.
b
If a consumer requests additional information concerning an Investigative Consumer Report, how long does the insurer or reporting agency have to comply? a. 3 days b. 5 days
a
If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insured, it is called a a. Joint life annuity. b. Joint and survivor annuity.
b
If an insurance company offers Medicare supplement policies, it must offer which of the following plans? a. A-J b. A
a
If an insured continually uses the automatic premium loan option to pay the policy premium a. 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
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.
1. The policy will terminate when the cash value is reduced to nothing.
If an insured continually uses the automatic premium loan option to pay the policy premium, (Choose from the following options) 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.
K purchased a $90,000 annuity with a single premium, and began receiving payments 2 months after that. What type of annuity is it?
Immediate
What type of annuity can be purchased with a single premium and provides benefits payments immediately?
Immediate
a
In comparison to a policy that uses the accidental means definition, a policy that uses the accidental bodily injury definition would provide a coverage that is a. Broader in general. b. More limited in general.
Which of the following ULTIMATELY determines the interest rates paid to the owner of a fixed annuity?
Insurer's guaranteed minimum rate of interest
what entities make up the Medical Information Bureau?
Insurers
What is the benefit of choosing extended term as a nonforfeiture option?
It has the highest amount of insurance protection Under this option the insurer uses the policy cash value to convert to term insuirance for the same face value amount as the former permanent plsn
What is NOT true regarding installments for a fixed period annuity settlement option?
It is a life contingency option.
If a deferred annuity is surrendered prematurely, a surrender charge is imposed. How is the surrender charge determined?
It is a percentage of the cash value and decreases over time
Which of the following is NOT true regarding a Certificate of Authority?
It is issued to group insurance participants Before insurers may transact business in a specific state, they must apply for a license or Certificate of Authority
Which of the following is NOT true regarding a Certificate of Authority
It is issued to group insurance participants. Before insurers may transact business in a specific state, they must apply for a license or certificate or Authority from the state department of insurance and meet any financial requirements set down by the state.
Which of the following is not true regarding the Life with Guaranteed Minimum annuity settlement option?
It provides a higher monthly benefit than a pure life annuity
Which of the following statements best describes the effect the Accerlerated Benefit provision would have on the benefits paid to the beneficiary?
It will decrease the benefits paid to the beneficiary
If an insured changes his payment plan from monthly to annually, what happens to the total premium?
It will decrease.
If an annuitant selects the pure or straight life annuity settlement option, in order to receive all of the money out of the contract, it would be necessary to do what?
Live at least to his/her life expectancy
Insurance is a contract that protects the insured from what?
Loss
Insurance is a contract by which one seeks to protect another from Uncertainty. Hazards. Loss. Exposure.
Loss. Insurance will protect a person, business or entity from loss.
1)6 years.
Michigan insurance policies can specify a time limit during which legal action against the insurer can be taken. This time limit, however, has to be at least (Choose from the following options) 1. 6 years 2. 3 years 3. 4 years 4. 5 years.
1.It allows for up to 15 excess credit hours to be carried forward to the next reporting period.
Michigan's continuing education requirement has each of the following characteristics EXCEPT (Choose from the following options) 1. It allows for up to 15 excess credit hours to be carried forward to the next reporting period 2. At least 3 hours must cover ethics 3. It requires satisfactory completion of at least 24 hours of approved training every biennium 4. Other than the 3 hours of ethics, licensees may take courses in any line.
a
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. continuation of group health b. reapplication of group health
All other factors being equal, which premium payment mode will require an overall higher premium: monthly or annual?
Monthly
Z falls from the roof of his house while fixing it and damanages his spinal column enough to render him disabled for a year. His insurance policy carries a Disabililty Income Benefit Rider. Which of the following benefits will Z receive?
Monthly premium waiver and monthly income The Disability Income Benefit rider waives the policy premiums, just like the Waiver of Premium rider. Unlike the Waiver of Premium rider, it allows the insurer to receive a weekly or monthly income during the disability period.
An applicant conceals relevant health information on the application. The applicant present what type of hazard?
Moral
2. Premium receipt
Most agents try to collect the initial premium for submission with the application. When an agent collects the initial premium from the applicant, the agent should issue the applicant a (Choose from the following options) 1. Warranty 2. Premium receipt 3. Statement of good health 4. Backdated receipt.
The type of insurance company organized to return any surplus money to its policyholders is known as what?
Mutual Company
the type of insurance company organized to return any surplus money to its policyholders is known as what?
Mutual Company
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.
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.
IN a Commerical General Liability policy, which of the following forms covers losses that occur, start or are discovered during the policy period, regardless of when the date is actually reported by the insurer?
Occurrence A clims made form provides coverage that occurs after a retroactive date and when a claim is made during the policy period. An occurrence form covers losses that start or are discovered during the policy period, regardless of when the date is actually reported and filed by the insured
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
Which of the following is another term for the accumulation period of the annuity?
Pay-in period
What is the term for the causes of loss insured against in an insurance policy?
Peril
If someone wants to buy a life insurance policy that will provide lifetime protection against premature death, what type of life insurance policy should it be?
Permanent
What type of life insurance offers an applicant a cash value element?
Permanent insurance (usually, whole life)
What document describes the specific information about a policy?
Policy Summary
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.
An employee has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called?
Profit sharing plan A profit sharing plan is one where the employer will contribute monies into an employee's retirement plan when the company shows a profit. The others are all qualitfied plans, but company profit isn't an issue with them (401K, tax-sheltered annuity, HR 10 plan)
A situation in which a person can only experience a loss and no gain presents what type of risk?
Pure risk
An individual has been contributing to a retirement account after taxes are taken out of his paycheck. His financial advisor told him that he will be allowed to make contributions after 70 1/2 . The account holder does not have to pay taxes on the growth of his account. What type of retirement account is this?
ROTH IRA
What is the main responsibility of a company's underwriting unit?
Risk selection
a
Ron joins the PPO that is provided by his employer. If Ron decides to go to a physician who is not a PPO provider, which of the following will happen? a. PPO will pay reduced benefits b. Ron will be required to pay a higher deductible
Which of the following determines the length of time that benefits will be received under the Fixed Amount settlement option?
Size of each installment The size of each installment determines the length of time that benefits are received under the Fixed Amount settlement option.
Which of the following is a risk classification used by underwriters for life insurance? Excellent Standard Poor Normal
Standard The three ratings classifications that denote the risk level of insureds are standard, substandard, and preferred. This classification system helps insurers to decide if an insured should pay a higher premium.
Equity Indexed Annuities seek higher returns and is tied to which index?
Standard and Poor's 500
An insurer organized to return a profit to the stockholders is what type of insurer?
Stock company
The insurer organized to return a profit to the stockholder is what type of insurer?
Stock company
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
Who owns stock companies?
Stockholders
b
Two individuals are in the same risk and age class; yet, they are charged different rates for their insurance policies due to an insignificant factor. What is this called? a. Law of Large Numbers b. discrimination
Which of the following types of risk will result in the highest premium? Substandard risk Standard risk Preferred risk All risks pay equal premiums
Substandard risk The "substandard" rating indicates that an individual represents an under-average insurance risk because of physical condition, personal or family history of disease, occupation, habits or hobbies. This rating incurs the highest premium if policy is issued.
The advantage of qualified plans to employers is
Tax deductible contributions
The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true?
The annuitant must be a natural person
What is NOT true about equity index annuities?
The annuitant receives a fixed amount of return and they earn lower interest rates than fixed annuities
The annuity owner dies during the accumulation period of his annuity. The cash value of his annuity exceeds the premiums he paid. There is no named beneficiary. What is true?
The cash value will be paid to the annuitants estate.
b
The corridor in a Universal Life Insurance policy raises the death benefit to avoid a. section 1035 classification b. losing tax advantages
b
The death protection component of Universal Life Insurance is always a. Increasing Term b. Annually Renewable Term
a
The death protection component of Universal Life Insurance is always a. annually renewable term b. whole life
Who is the beneficiary on a key-person life insurance policy?
The employer
3. An index like Standard & Poor's 500.
The equity in an equity index annuity is linked to (Choose from the following options) 1. The annuitant's individual stock portfolio 2. The insurance company's general account investments 3. An index like Standard & Poor's 500 4. The returns from the insurance company's separate account.
When planning for survivor protection in life insurance, what needs to be considered?
The insured's current assets, liabilities and survivor's needs
a
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 a. Incontestability clause. b. Reinstatement clause.
What is true regarding a modified guaranteed annuity?
The owner is guaranteed a fixed interest rate for a specific period of time.
a
The owner of a small business applies for a fire insurance policy with limits equal to 100% of the property's value. The owner has huge unsold inventories and a large personal gambling debt. From an underwriting standpoint, this might indicate a. moral hazard b. speculative risk
If the owner prematurely surrenders his deferred annuity before the annuitization period begins, which of the following is most likely to occur?
The owner will receive the premium payments that have been paid into the annuity plus any interest minus a surrender charge
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.
Regarding installments for a fixed amount, what is NOT true?
The payments will stop when the annuitant dies
All of the following statements are true regarding installments for a fixed amunt except
The payments will stop when the annuitant dies.
Which of the following best describes what the annuity period is?
The period of time during which accumulated money is converted into income payments
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
3. Fiduciary responsibility
The requirement that agents not commingle insurance monies with their own funds is known as (Choose from the following options) 1. Express authority 2. Accepted accounting principal 3. Fiduciary responsibility 4. Premium accountability.
Which is true about the spouse term rider
The rider is usually level term insurance
Which of the following is TRUE for both equity indexed annuities and fixed annuities?
They have a guaranteed minimum interest rate.
What is the main purpose of the regulation on life insurance policy illustrations?
To help the public make educated decisions about buying life insurance.
What is the purpose of key person insurance?
To minimize the risk of financial loss caused by the death of a key employee
b
To which of the following policies would the state regulations on life insurance illustrations apply? a. A group annuity b. A whole life policy with a death benefit of $20,000
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
Which of the following would be a typical maximum benefit offered by major medical plans? a. $1 million b. $50,000
a
Tyler applied for an individual health insurance policy. While completing the application, his agent told him that all of the following statements would be underwriting factors EXCEPT a. his jobs requires that he flies regularly on a commercial airplane b. his avocations include scuba diving
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.
a
Under HIPAA, which of the following is INCORRECT regarding eligibility requirements for conversion to an individual policy? a.An individual who was previously covered by group health insurance for 6 months is eligible. b. An individual who was previously covered by group health insurance is eligible.
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
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
Which of the following products requires a securities license?
Variable annuity
Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract? Indemnity Representation Warranty Concealment
Warranty A warranty in 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. Representations are statements that are true to the best of the applicant's knowledge.
b
What does "liquidity" refer to in a life insurance policy? a. The policyowner receives dividend checks each year. b. Cash values can be borrowed at any time.
b
What is a major problem with naming a trust as the beneficiary of a life insurance policy? a. The insured must have the Superintendent's permission to name a trust as the beneficiary b. They are expensive to administer.
b
What is a penalty tax for nonqualified distributions from a health savings account? a. 10% b. 20%
a
What is a primary difference between an IRA and an SEP? a. Much more money can be contributed to a SEP. b. Only $3,000 maximum per year can be contributed to a SEP.
b
What is the advantage of reinstating a policy instead of applying for a new one? a. The cash values have gained interest while the policy was lapsed b. The original age is used for premium determination
b
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 low claims experience because they get lower premiums.
b
What is the benefit of experience rating? a. Experience rating helps employers with high claims experience get group coverage. b. Experience rating helps employers with low claims experience because they get lower premiums.
b
What is the difference between the Medicare approved amount for a service or supply and the actual charge? a. coinsurance b. excess charge
b
What is the major difference between a Stock Redemption Plan and a Cross Purchase Plan? a. In a Stock Redemption Plan, the policies are owned by an entity, and in a Cross Purchase Plan, the policies are owned by a corporation. b. In a Stock Redemption Plan, the policies are owned by an entity, and in a Cross Purchase Plan, the policies are owned by individuals.
a
What is the maximum amount of time a health plan can exclude a pre-existing condition? a. 12 months b. 6 monthes
b
What is the purpose of a Medicare Carve-out or Supplements? a. They act as excess insurance paying those covered expense not paid by Medicare because of previous disabilities. b. They pay deductibles or copayments that are not paid by Medicare.
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
a
What is the term for how frequently a policyowner is required to pay the policy premium? a. Mode b. consideration
b
What kind of LTC benefit would provide coverage for care for functionally impaired adults on a less than 24-hour basis? a. Residential Care b. adult day care
a
What method do insurers use to protect themselves against catastrophic losses? a. Reinsurance b. risk-management
b
What policy component must decrease in decreasing term insurance? a. cash value b. face amount
a
What policy component must decrease in decreasing term insurance? a. face amount b. cash value
b
What provision can reduce the disability benefit based upon the insured's current income? a. Rehabilitation benefit b. Relation of earnings to insurance
a
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. Facility of payment clause b. nonforfeiture clause
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. Consider decreasing the premium.
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
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
When a policy is surrendered for its cash value a. Coverage ends and the policy cannot be reinstated. b. Coverage ends but the policy can be reinstated at anytime
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. Obtain from the producer a list of the applicant's life insurance or annuity contracts to be replaced.
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
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
When an insurer offers services like preadmission testing, second opinions regarding surgery, and preventative care, which term would best apply? a. claimes reduction b. case management provison
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
b
When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is a. Unilateral. b. Conditional.
When would a misrepresentation on an insurance application be considered fraud?
When it is intentional and material.
In forming an insurance contract, when does an acceptance usually occur?
When the insurer approves a prepaid application.
a
Which nonforfeiture option provides coverage for the longest period of time? a. reduced paid- up b. paid-up option
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 are the main factors taken into account when calculating residual disability benefits? a. Present earnings and standard cost of living b. Present earnings and earnings prior to disability
b
Which of the following best describes gross annual premium? a. Expense premium b. Annual cost of mortality plus expenses
b
Which of the following best describes the process of policy delivery? a. After the underwriting department approves the application, the prospective insured must sign a statement agreeing to the final terms of the contract. The agent then delivers the policy by certified or express mail only. b. After the insurer receives the application, it is forwarded to the underwriting department. After the application is approved and the policy is issued, the policy is delivered either in person or by mail.
4. The period of time during which accumulated money is converted into income payments The "annuity period" is the time during which accumulated money is converted into an income stream.
Which of the following best describes what the "annuity period" is? (Choose from the following options) 1. The period of time spanning from the accumulation period to the annuitization period 2. The period of time during which money is accumulated in an annuity 3. The period of time spanning from the effective date of the contract to the date of its termination 4. The period of time during which accumulated money is converted into income payments
a
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
b
Which of the following does NOT have to be disclosed in a long-term care (LTC) policy? a. Any riders or endorsements b. The aggregate amount of premiums due
a
Which of the following entities must approve all Medicare supplement advertisements? a. Insurance Commissioner or Director b. NAIC
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
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 considered to be a basic service, under a nonscheduled plan? a. dentures b. endodontics
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 the purpose of HIPAA? a. To provide immediate coverage to new employees who had been previously covered for 18 months b. To prohibit discrimination against employees based on their health status
a
Which of the following is NOT true of Section 1035 Policy Exchanges? a. Any exchange made under Section 1035 of the Internal Revenue Code must be completed within 30 days. b. It is an IRS Code which permits like kind exchanges of property.
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.
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.
a
Which of the following is a feature of a variable annuity? a. Benefit payment amounts are not guaranteed. b. Payments into the annuity are kept in the company's general account.
4. Telling a client that his first premium will be waived if he purchased the insurance policy today
Which of the following is an example of a producer being involved in an unfair trade practice of rebating? (Choose from the following options) 1. Inducing the insured to drop a policy in favor of another one when it's not in the insured's best interest 2. Charging a client a higher premium for the same policy as another client in the same insuring class 3. Making deceptive statements about a competitor 4. Telling a client that his first premium will be waived if he purchased the insurance policy today
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 guaranteed to the policyowner through nonforfeiture values? a. A beneficiary has the right to choose a settlement option. b. The cash value in a policy belongs to the insured even if the policy lapses or is surrendered.
d)Creditor is the policyowner.
Which of the following is true about credit life insurance? (Choose from the following options) 1. Debtor is the annuitant 2. Creditor is the insured 3. Debtor is the policy beneficiary 4. Creditor is the policyowner.
b
Which of the following is true of a children's rider added to an insured's permanent life insurance policy? a. Each child covered must show evidence of insurability. b. It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age.
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.
b
Which of the following is true regarding statistics used in an advertisement? a. The equations used to figure them must also be shown. b. The source must be identified.
b
Which of the following is true regarding the annuity period? a. It is the period of time during which the annuitant makes premium payments into the annuity. b. It may last for the lifetime of the annuitant or for a shorter period of time.
3. It may last for the lifetime of the annuitant or for a shorter period of time.
Which of the following is true regarding the annuity period?a)It is also referred to as the accumulation period.b)It is the period of time during which the annuitant makes premium payments into the annuity.c)It may last for the lifetime of the annuitant or for a shorter period of time.d)During this period of time the annuity payments grow interest tax deferred. The "annuity period" is the time during which accumulated money is converted into an income stream. It may last for the lifetime of the annuitant or for a shorter specified period of time depending on the benefit payment option selected.
2)The annuitant assumes the risks on investment.
Which of the following is true regarding variable annuities? (Choose from the following options) 1. A person selling variable annuities is required to have only a life agent's license 2. The annuitant assumes the risks on investment 3. The funds are invested in the company's general account 4. The company guarantees a minimum interest rate.
2. The annuitant assumes the risks on investment.
Which of the following is true regarding variable annuities? (Choose from the following options) 1. A person selling variable annuities is required to have only a life agent's license 2. The annuitant assumes the risks on investment 3. The funds are invested in the company's general account 4. The company guarantees a minimum interest rate.
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. The name of a specific agent
b
Which of the following premium modes would result in the highest annual cost for a Life Insurance Policy? a. Annual b. Monthly
a
Which of the following producers will be required to complete continuing education hours to renew his license? a. A producer licensed 4 years ago who holds only one line of authority b. A nonresident producer who only completed continuing education in his own state
b
Which of the following products requires a securities license? a. equity indexed annuity b. variable annuity
a
Which of the following products requires a securities license? a.Variable annuity b.Fixed annuity
b
Which of the following regulatory authorities participated in creating the National Do Not Call Registry? a. SEC b. FTC
1. An insured and his child are injured in the same accident, and the uninjured, nonworking spouse wants to collect hardship benefits from the cash value of the life policy
Which of the following situations would be addressed by The Uniform Simultaneous Death with a Common Disaster provision? (Choose from the following options) 1. An insured and his child are injured in the same accident, and the uninjured, nonworking spouse wants to collect hardship benefits from the cash value of the life policy 2. The insured and primary beneficiary are injured in the same car accident, and the beneficiary dies within 30 days of the insured 3. Two beneficiaries of a life insurance policy are both killed in the same car accident. Because there are no remaining beneficiaries, the insured must select new ones 4. Both the insured and beneficiary are severely injured and want to request advanced benefits to pay for hospitalization and subsequent medical treatment.
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
b
Which of the following statements is NOT true, regarding health insurance policy provisions? a. All individual policies contain Universal Mandatory Provisions b. All additional provisions written by insurers are cataloged by their respective states.
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 of the following will NOT be an appropriate use of a deferred annuity? a. Creating an estate b. Accumulating retirement funds
b
Which of the following would NOT be an exclusion in a long-term care policy? a. acoholism b. alzheimer's disease
b
Which of the following would NOT be true regarding a $100,000 20-year level term policy? a. If the insured dies before the policy expired, the beneficiary will receive $100,000 b. At the end of 20 years, the policy's cash value will equal $100,000
a
Which of the following would NOT be used in preventive care? a. Chemotherapy b. annual physical exam
b
Which of the following would be considered a non-medical insurance application? a. An application that does not ask any questions about the applicant's medical history b. An application on which the medical information is completed by the applicant and the agent only
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
b
Which of the following would help prevent a universal life policy from lapsing? a. Adjustable premium b. target premium
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
4)Option B
Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? (Choose from the following options) 1. Corridor option 2. Variable option 3. Option A 4. Option B
b
Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early? a. Accumulation at Interest b. Paid-up option
b
Which term describes a situation in which people who are the most likely to have claims are also the most likely to seek insurance? a. Law of Numbers b. Adverse Selection
4. Implied
Which type of authority is based on the actions, words, or deeds of the principal? (Choose from the following options) 1. Apparent 2. Express 3. Lingering implied 4. Implied
a
Which type of care is NOT covered by Medicare? a. Long-term b. respite
a
Which type of service under a nonscheduled plan typically has large deductibles and pays around 50% for the services provided? a. Major service b. Basic service
a
Which types of insurance companies marketing long-term care insurance coverage must establish procedures to assure that any comparison of policies by its agents will be fair and accurate? a. Every company is required to establish marketing procedures. b. mutual and stock companies
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
b
Why should the agent personally deliver the policy when the first premium has already been paid? a. To make sure the policy is not stolen or lost b. To help the insured understand all aspects of the contract
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
Agents who persuade insureds to cancel a policy in favor of another one when it might not be in the insured's best interest are guilty of a) Twisting. b) Defamation. c) Misrepresentation. d) Rebating.
a
Before he died, an annuitant had received $12,500 in monthly benefits from his $25,000 straight life annuity. He was also the insured under a $50,000 paid-up whole life policy that named his wife as primary beneficiary. Considering both contracts, how much will the annuitant's spouse receive in benefits? a) $50,000 b) $62,500 c) $75,000 d) Nothing
a
Employer contributions made to a qualified plan a) Are subject to vesting requirements. b) May discriminate in favor of highly paid employees. c) Are after-tax contributions. d) Are taxed annually as salary.
a
Which of the following hospice expenses would NOT be covered in a cost-containment setting? a) Antibiotics b) Tylenol c) Morphine d) Special hospital bed
a
Which of the following statements about occupational vs. nonoccupational coverage is TRUE? a) Disability insurance can be written as occupational or nonoccupational. b) Group medical expense policies and individual medical expense policies always cover both occupational and nonoccupational injuries. c) Individual disability policies never cover nonoccupational injuries. d) Only group disability income policies can be written on an occupational basis.
a
Which of the following statements about the reinstatement provision is true? a) It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated. b) It permits reinstatement within 10 years after a policy has lapsed. c) It provides for reinstatement of a policy regardless of the insured's health. d) It guarantees the reinstatement of a policy that has been surrendered for cash.
a
Which of the following statements is NOT correct concerning the COBRA Act of 1985? a) It requires all employers, regardless of the number or age of employees, to provide extended group health coverage. b) It covers terminated employees and/or their dependents for up to 36 months after a qualifying event. c) It applies only to employers with 20 or more employees that maintain group health insurance plans for employees. d) COBRA stands for Consolidated Omnibus Budget Reconciliation Act
a
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)
The president of a manufacturing company has offered one of the company's officers a special individual annuity plan that is unaavailble to lower echelon employees. this plan would be funded with before tax corporate dollars, and it does not meet government approval standards. This annuity plan is subject to:
a nonqualified annuity plan Nonqualified plans are perfectly legal for selected employees to receive certain types of benefits. Before tax corporate dollars can be used for these plans, and they are not subject to government standards. Nonqualified plans are not tax deductible
Viatical settlement broker
a person that negotiates viatical settlements between a viator and one or more viatical settlement providers
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
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
Illustrations
a producer may only use a life insurance or annuity illustration provided by an insurer
37. An individual applied for an insurance policy. The payment for the first premium was included with the application. Which of the following statements is correct?a)With a conditional receipt, the policy is in effect as of the date of application. b)The underwriting process is complete and coverage is issued automatically. c)The coverage would be in effect for accidental death only. d)Coverage cannot be in effect until a policy is issued and the applicant accepts the policy.
a)With a conditional receipt, the policy is in effect as of the date of application If the company acknowledges receipt of the premium with a conditional receipt, the policy is in effect on the date of the application or the date of the medical exam (whichever is later), provided that the applicant is found insurable at the rate applied for.
A provision in a life insurance policy that provides for the early payment of some portion of the face value should the insured suffer from terminal illness is called
an accelerated benefit provision can be made in a lump sum or in monthly installments over a specific period of time. this provision is given without an increase in premium
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%
Indexed or equity indexed annuities
are fixed annuities that invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity the indexed annuity has a guaranteed minimum interest rate.
All of the following are unfair claims settlement practices EXCEPT a) Failing to acknowledge pertinent communication pertaining to a claim. b) Suggesting negotiations in settling the claim. c) Refusing to pay claims without conducting a reasonable investigation. d) Failing to adopt and implement reasonable standards for settling claims.
b
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? a) When the agent submits the application to the company and the company issues a conditional receipt b) When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health c) On the designated effective date d) On the application date
b
An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy? a) Nonforfeiture options b) Guaranteed insurability option c) Dividend options d) Guaranteed renewable option
b
Which of the following is an example of apparent authority of an agent appointed by an insurer? a) The agent has business cards and stationery printed. b) The agent puts up a sign with the insurer's logo without express permission. c) The agent accepts a premium payment after the end of the grace period. d) The agent accepts a premium payment during the grace period.
c
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
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
A Medicare SELECT policy does all of the following EXCEPT a) Provide payment for full coverage under the policy for covered services not available through network providers. b) Provide for continuation of coverage in the event that Medicare SELECT policies are discontinued due to the failure of the Medicare SELECT program. c) Prohibit payment for regularly covered services if provided by non-network providers. d) Make full and fair disclosure in writing of the provisions, restrictions, and limitations of the Medicare SELECT policy to each applicant.
c
All of the following statements about equity index annuities are correct EXCEPT a) The interest rate is tied to an index such as the Standard & Poor's 500. b) They invest on a more aggressive basis aiming for higher returns. c) The annuitant receives a fixed amount of return. d) They have a guaranteed minimum interest rate.
c
An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called? a) Tax-sheltered account plan b) HR 10 plan c) Profit sharing plan d) 401(k) plan
c
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated? a) Representation b) Adhesion c) Consideration d) Good faith
c
How does a member of an HMO see a specialist? a) HMOs do not cover specialists. b) The member is allowed to choose his/her own specialist. c) The primary care physician refers the member. d) The insurer chooses the specialist.
c
Which of the following best describes a pure life annuity settlement option? a) Benefits are paid for a fixed period of time, specified when the policy begins to pay. b) Pure life provides payments for as long as both the annuitant and the spouse are living. c) Pure life provides payments for as long as the annuitant is alive. d) Pure life guarantees that all the proceeds will be paid out.
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
c
Which of the following is a feature of a variable annuity? a) Interest rate is guaranteed. b) Securities license is not required. c) Benefit payment amounts are not guaranteed. d) Payments into the annuity are kept in the company's general account.
c
Which of the following statements concerning buy-sell agreements is true? a) Benefits received are considered income taxable. b) Buy-sell agreements pay in the event of a medical emergency. c) Buy-sell agreements are normally funded with a life insurance policy. d) Premiums paid are deductible as a business expense.
c
Which renewal option does NOT guarantee renewal and allows the insurance company to refuse renewal of a policy at any premium due date? a) Guaranteed renewable b) Noncancellable c) Optionally renewable d) Conditionally renewable
c
a
where would the underwriter find relevant info not presented by the applicant but communicated by the producer? a. application b. policy summary
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
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
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
Which of the following defines a peril?
cause of loss A peril is a specific cause of loss insured in a policy.
insuring clause
contains the company's promise to pay
When a policy is surrended for its cash value
coverage ends and the policy cannot be reinstated Once the cash surrender option is selected, the coverage is terminated, and the policy cannot be reinstated.
credit insurance
covers the life of a debtor
Which of the following will NOT be an appropriate use of a deferred annuity?
creating an estate Deferred annuities grow tax deferred, and are best suitable for accumulating retirement income or funds for children's college education.
What kind of insurance covers the life of a debtor in connection with a credit transaction
credit insurance Credit life insurance covers the life of a debtor in connection with a specific loan or other credit transaction
A partnership buy sell agreement where each partner purchases insurance on the life of each other is called a
cross purchase plan each partner is owner, payor and beneficiary
An annuity owner is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that will equal the performance of the Standard and Poor's 500 Index. She would likely purchase a(n) a) Variable Annuity. b) Flexible Annuity. c) Immediate Annuity. d) Equity Indexed Annuity.
d
As it pertains to group health insurance, COBRA stipulates that a) Retiring employees must be allowed to convert their group coverage to individual policies. b) Terminated employees must be allowed to convert their group coverage to individual policies. c) Group coverage must be extended for terminated employees up to a certain period of time at the employer's expense. d) Group coverage must be extended for terminated employees up to a certain period of time at the former employee's expense.
d
Julie must have orthodontic work performed on her incisors. Which type of service would this be called, under a nonscheduled plan? a) Basic service b) Minor service c) Repair service d) Major service
d
Medicare Part A services do NOT include which of the following? a) Post hospital Skilled Nursing Facility Care b) Hospitalization c) Hospice Care d) Outpatient Hospital Treatment
d
When Linda suffered a broken hip, she notified her agent, in writing, within 12 days of the loss. However, her agent did not notify the insurance company until 60 days after the loss. Which of the following statements correctly explains how this claim would be handled? a) The insurer may delay the payment of this claim for up to 6 months. b) The insurer may settle this claim for less than it otherwise would have had the notification been provided in a timely manner. c) The insurer may deny the claim since it was not notified within the required 20-day time frame. d) The insurer is considered to be notified since the notification to agent equals notification to the insurer.
d
he Probationary Period is a) The number of days the insured has to determine if he/she will accept the policy as received. b) The stated amount of time when benefits may be reduced under certain conditions. c) The number of days that must expire after the onset of an illness before benefits will be earned. d) A specified period of time that a person joining a group has to wait before becoming eligible for coverage.
d
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 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
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
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.
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
Once an agent has met the requirements to sell long term care insurance, how often must he or she complete the 4 hours of training?
every 2 years
Once an agent has met the requirements to sell long-term care insurance, how often must he or she complete the 4 hours of ongoing training
every 2 years every agent who sells, solicits, or negotiates long term care insurance in Minneosta must be licensed as an insurance producer for life and disability and complete a one time training course and the ongoing training every 24 months
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
concerning insurance, the definition of a fiduciary responsibility is
handling insurer funds in a trust capacity
Deadline (viatical settlement)
if the proceeds are not given to the viator within the prescribed time limits, the viator may void the contract until such proceeds are paid and accepted
Disclosure of ownership transfer or beneficiary change
if the viatical settlement provider transfers ownership or changes the beneficiary of the policy, it must notify the insured within 20 days
Credit life insurance is issued on a decreasing term when the debt to the creditor is being repaid on an
installment basis
What type of annuity guarantees to pay income to the annuitant each year as long as he lives, and upon death, the annuity will refund the remaining payments to the beneficiary?
installment refund annuity
What are the two components of the universal policy?
insurance and cash account A universal policy has two components: an insurance component and a cash account The insurance component of a universal life policy is always annually renewable term insurance. The cash account accumulates on a tax deferred basis each year and earns either the guaranteed contract rate or the
whole life insurance provides permanent protection
insurance is covered for life, as long as the policy premiums are paid. Premiums and death benefits are both guaranteed, and they will remain level, as long as the policy is in force
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
the provision stating the insured duty duty to pay death benefits upon the death of the insured and to whom the benefits will be paid
insuring clause
Equity indexed annuities
invest on an aggressive basis in order to yield higher results. they have guaranteed minimum interest rates they are less riskier than variable annuities
A tax sheltered annuity
is a special tax favored retirement plan available only to certain groups of people (educational, religious, public education)
Deferred Annuities
is an annuity that either is purchased with a single lup sum or is purchased through periodic payments.
Single Premium Immediate Annuity
is one that is purchased with a single, lump sum payment and provides income payments that start within 1 year from the date of purchase.
Misrepresentations is
issuring, publishing or circulating any illustration of sales information that is false, misleading or deceptive to policy benefits or terms. This includes oral statements
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
Which option is being used when the insurer accumulates dividends at interest, plus interest and then uses the accumulated dividends plus interest and the policy cash value to pay the policy up early?
paid up option
survivorship
surviving beneficiary will continue receiveing 2/3 of the beenfi paid when both were alive
Which option is being utilized when insurer acculumates dividents at interest and then uses the accumulated dividends plus interest, and the policy cash value to pay up the policy early
paid up option this is different from paid up additions, in which the insured can use dividends to buy additional policies that increase the face amount of the original policy
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
Suitability of annuities act
prior to the purchase or exchange of an annuity, the producer or insurer must make a reasonable effort to obtain information concerning all of the following: -the consumer's financial status -the consumer's tax status -the consumer's investment objectives records of information used in making recommendations that were the basis for transaction must be maintained for 5 years after the transaction is completed
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
When a life insurance policy stipulates that the beneficiary will receive payment sin specified installments or for a specified number of years, what provision prevents the beneficiary from changing or borrowing from the planned installments
spendthrift provision When a life insurance policy contains a spendthrift provision, all rights of the beneficiary to change time of payment or amount of installments, surrender cash, borrow against, or assign for any purpose, are withdrawn and those parts of the policy that may give the beneficiary such rights are void.
representation
statements are true to the best of the applicants knowledge
For an individual who is not covered by an employer sponsored plan, IRA contributions are
tax deductible
A father owns a life insurance policy on his 15 year old daughter. The policy contains the optional Payor Benefit Rider. If father becomes disabled, what will happen to preimuyms?
the insured's premiums will be waived until she is 21.
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)
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
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
insured
the person on whose life an insurance policy is written
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
Under an extended term nonforfeiture option, the cash value is converted to
the same face amount as in the whole life policy Under this option the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy
b
the term "illustration" in a life insurance policy refers to a. depiction of policy benefits and guarantees b. presentation of non-guaranteed elements of a policy
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.)
for the purpose of insurance, risk is defined as:
the uncertainty or chance of loss
Which of the following is TRUE about a nonforfieture values
they are required by state law to be included int he policy. Nonforfeiture values are required by state law to be included in the policy, and cannot be altered by the pollicyowner. A table showing the nonf for the next 20 years must be included.
b
what limits the amount that a policyowner may borrow from a whole life insurance policy? a. face amount b. cash value
b
what provisions can reduce the disability benefit base upon the insured's current income? a. waiver of monthly premium b. relation of earnings to insurance
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
b
which of the following best describes what the "annuity period" is? a. the period of time spanning from the accumulation period to the annuitization period b. the period of time during which accumulated money is converted into income payments
b
which of the following hospice expenses would NOT be covered in a cost containment setting? a. Tylenol b. antibiotics
b
which of the following individuals are responsible for making premium payments in an HMO plan? a. payors b. subscribers
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
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 a specific Period of time D. it provides income the beneficiary cannot outlive
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
b
which of the following is true regarding taxation of accelerated benefits under a life insurance policy? a. there is a 10% penalty for early distributions of the death benefit b. they are tax free to terminally ill insured
b
which of the following is usually true of a participating life insurance policy? a. may be converted to a term life policy b. pays dividends to policyowners
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
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
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