PSI EXAM
Anyone convinced of committing an insurance fraud may be fined up to the greater amount of double the value of the fraud or...
$150,000
What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act?
$2,500
An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement?
$200,000
An employee will be taxed on the cost of group life insurance paid by the employer if the amount of coverage exceeds...
$50,000
A policyowner cancels his life policy but instructs the insurance company to transfer the cash value of his policy to an annuity. The non taxable transaction is called...
1035 exchange
If a person is disabled at age 27 and meets Social Security's definition of total disability, how many work credits must he/she earned to receive benefits?
12 credits
If a policyholder contracts an insurance company about a claim and expects a response to the inquiry, within what span of time must the agent respond?
15 days
Which of the following best describes a Nordic all application?
A medical portion of an application that asks for medical information but does not require a medical exam
Which of the following would NOT be considered a form of direct response marketing?
A sign in an insurer's office
When the California Insurance Code need to be changed, the legislature must design and pass a bill. Once the bill is passed, it is presented to the Governor and becomes law if not returned to the legislature within what time frame?
A specified period for 12 - 30 days
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...
Accelerated Benefit Provision
An insurer has made all of the decision regarding the provisions included in the insured's policy. The insured finds an objectionable provision and wants to negotiate it with the insurer but is not allowed to do so. Her only options are to reject the policy or accept it as is. Which contract feature does this describe?
Adhesion
Naming the trust as the beneficiary of a life insurance policy can accomplish all of the following for the policyowner EXCEPT...
Allow the trustee to transfer the assets of the trust to their personal account
During a pre-selection interview, an agent is allowed to do all of the following EXCEPT...
Ask questions that are not on the application but that are important for underwriting
Which of the following statements regarding Business Overhead Expense policies is NOT true?
Benefits are usually limited to six months
When the partners of a business develop an arrangement whereby should one of them die or become permanently disabled, the other partners would purchase the interest of the deceased or disabled partner at a determined price, this is called a/an...
Business continuation plan
Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?
Cash surrender
In reference to fixed annuities, what comprises most of a life insurance company's general account?
Conservative investments like bonds
Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as...
Contracts of adhesion
A rider that may be attached to a life insurance policy that will adjust the face amount based upon a specific index, such as the Consumer Price Index, is called...
Cost of living rider
Which of the following is NOT allowed in credit life insurance?
Creditor requiring that a debtor buys insurance from a certain insurer
Which of the following are NOT fundable by annuities?
Death Benefits
Which of the following are NOT findable 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
Which of the following terms is defined by the California Insurance Code as unassigned funds that must be reported on a stock insurer's annual statement?
Earned surplus
How often must every insurer doing business in California report his financial condition to the Commissioner
Every year, on or before March 1
Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information?
Fair Credit Reporting Act
A young father would like a life insurance policy to provide coverage for all five family members at the lowest cost. Which type of policy would he most likely buy?
Family (protection) policy
What is an equity indexed annuity considered to be a fixed annuity?
It has a harangued minimum interest rate
Which of the following is TRUE regarding the accumulation period of an annuity?
It is a period during which the payments into the annuity grow tax deferred.
If a retirement plan or annuity is "qualified", this means...
It is approved by the IRS
Which of the following is true regarding free insurance issued in the state?
It is illegal
When a reduced-paid up nonforfeiture option is chosen, what happens to he face amount of the policy?
It is reduced to the amount of what the cash value would buy as a single premium
Which of the following is TRUE regarding the annuity period?
It may last for the lifetime of the annuitant
Which of the following is TRUE regarding the annuity period?
It may last for the lifetime of the annuitant.
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 to the beneficiary
Which of the following is NOT true regarding the needs approach method of determining the value of an individual's life?
Need is predicted using the number of years until the insured's retirement
A licensed insurance agent overhears a conversation that leads him to believe a person is committing fraud. If the agent makes a written report to a law enforcement agency and the person is investigated, but it turns out that it was an erroneous accusation, what charge will the agent face?
No charges, the insurance Code gives the agent legal immunity
Under a straight life annuity, if the annuitant dies before the principal amount is paid out, the beneficiary will receive
Nothing; the payments will cease.
The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the...
One-year term option
Applicants for insurance who are blind may be rated substandard for life insurance...
Only on the basis of information unrelated to their blindness
Which Universal Life option has a gradually increasing cash value and a level death benefit?
Option A
Which of the following riders would NOT cause the Death Benefit to increase?
Payor Benefit Rider
An insured who signs a fraudulent claim form may be guilty of...
Perjury
All of the following are examples of risk retention EXCEPT...
Premiums
Regarding the taxation of Business Overhead policies,...
Premiums are deductible and benefits are taxed
A life insurance policy can be delivered by all of the following means, EXCEPT...
Priority mail
What is the purpose of errors and omissions insurance?
Protect agents against charges that they didn't properly serve a client
What form of the annuity settlement options provides payments to an annuitant for the rest of the annuitant's life and ceases at the annuitant's death?
Pure life
Which nonforfeiture option provides coverage for the longest period of time?
Reduced paid-up
Adverse selection is a concept best described as...
Risks with higher probability of loss seeking insurance more often than other risks
Equity indexed annuities...
Seek higher returns
An applicant buys a non qualified annuity, but dies before the starting date. For which of the following beneficiaries would the contract's interest NOT be taxable?
Spouse
Your client is planning to retire. She has accumulated $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...
Straight life
The advantage of qualified plans of employers is...
Tax-deductible contributions
All of the following entities regulate variable life policies EXCEPT...
The Guaranty Association
Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean?
The beneficiary will only receive payments of the interest earned on the death benefit
A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums?
The insured's premiums will be waived until she is 21
All of the following are TRUE statements regarding the accumulation at interest option EXCEPT...
The interest is not taxable since it remains inside the insurance policy
Not all losses are insurable, and there are certain requirements that must be met before a risk is a proper subject for insurance. These requirements include all of the following was EXCEPT...
The loss may be intentional
The Department of Insurance contacts an agent about a claim that was settled two months ago. Within what time frame must the agent issue a complete response?
21 days
The Commissioner may suspend an applicant's license without a hearing if the applicant has had another professional license suspended or revoked within what time period?
5 years
The minimum number of credits required for partially insured status for Social Security disability benefits is...
6 credits
To attain certainly insured status under Social Security, a worker must have earned at least how many credits during the last 13 quarters?
6 credits
An investor buys a life insurance policy on an elderly person in order to sell it for a life settlement. This is an example of...
A STOLI policy
Any insurance agent who commits a repeated violation of the Insurance Code with respect to insurance replacement will be liable for...
An administrative penalty of no less than $5,000 and no more than $50,000 per violation
Which of the following would be considered a nonmedical insurance application?
An application on which the medical information is completed by the applicant and the agent only
Which of the following would be converted by contract law?
An insured suing the insurer for failure to provide promised benefits
The Code defines the term "transact" as all of the following EXCEPT...
Analyzing a contract of insurance
When an annuity is written, whose life expectancy is taken into account?
Annuitant
Which concept is associated with "exclusion ratio"?
Annuities payments
Your client plans to reitre 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 option should he consider?
Annuity certain
Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other will be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?
Any form of life insurance
Any insurance agent who engages in the insurance business and violates the Code with respect to insurance replacement shall on the first violation...
Be fined a sum of $1,000
Any insurer who engages in the insurance business and violates the Code with respect to insurance replacement shall on the first violation...
Be fined a sum of $10,000
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 turns age 60 is called?
Blackout period
After being hired to deliver newspapers to his neighbors, a man is provided with $10,000 of life insurance by the newspaper. He would be covered under which kind of life insurance?
Blanket life
Which of the following statements concerning buy-sell agreements is true?
Buy-sell agreements are normally funded with a life insurance policy
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?
Consideration
When an insured makes untruthful statements on the application for insurance and pays the required premium, it is known as which of the following?
Consideration
A family which pays monthly income upon the death of the breadwinner for a predetermined number of years after death, plus a lump sum at death, and combines level term and whole life is known as which policy?
Family maintenance
When a policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option?
Fixed amount
When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option?
Fixed amount
When doing business in this state, an insurance company that is formed under the laws of another state is known as which type of insurer?
Foreign
An individual is purchasing a permanent life insurance policy with a face value of $25,000 while this is all he insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy?
Guaranteed insurability option
Events or conditions that increase the chances of an insured loss occurring are referred to as...
Hazards
Units with the same or similar exposure to loss are...
Homogenous
The key factor of representation that allows the injured party to rescind the contract is...
If the representation is false in a material point
The type of term insurance that provides increasing death benefits as he insured ages is called...
Increasing term
What type of insurance would be used for a Return of Premium rider?
Increasing term
Martha claims to have injured her back at work. She tells the doctor that she cannot bend, lift, or even sit comfortably without a great pain. Based on Martha's statements, the doctor certifies her disability and she begins to receive disability benefits from the insurer. If it can be shown that Martha did not suffer the injury she has claimed or that she is not suffering the effects she is claiming, she will be charged with...
Insurance fraud
When agents are acting within the scope of their contract, their actions will be assumed to be the acts of the...
Insurer
Which provision of a life insurance policy states the insurer's duty to pay benefits upon the death of the insured, and to whom the benefits will be paid?
Insuring clause
What is the main purpose of the Seven-Pay Test?
It determines if the insurance policy is an MEC
Which of the following statements is TRUE concerning the Accidental Death Rider?
It will pay double or triple the face amount
The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called...
Joint and survivor
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...
Joint life annuity
A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that?
Joint life policy
The growing tendency of individuals to file lawsuits and to claim tremendous amounts for alleged damages is known as...
Legal hazard
An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it?
Limited-pay life
What is the term used when a person sells his assets as a way to gain money?
Liquidation
Acting as a agent on a nonadmitted insurer (unless a surplus line broker) is considered a/an...
Misdemeanor
An independent agent may have contacts with which of the following?
More than one insurer
After an insurance contract has been delivered to an insured who is under 60 years of age, if any changes to the coverage are being made, a notice of the changes...
Must be in writing, signed by an officer of the insurer, and may be mailed to the insured's last known address
Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report...
Must be informed of the source of the report
The annuity owner dies while the annuity is still in the 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
Which of the following is an example liquidity in a life insurance contract?
The cash value available to the policyowner
Which of the following is true regarding a modified guaranteed annuity?
The owner is guaranteed a fixed interest rate for a specific period of time
Which of the following best describes what the annuity period is?
The period of time during which accumulated money is converted into income payments
Which of the following is NOT true of life settlements?
The seller must be terminally ill
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
What is the main difference between a life agent and a life analyst?
The way each is compensated
Which of the following statements regarding policy dividends is true?
They are a refund of unearned premiums
Which of the following is true regarding taxation of acceleration benefits under a life insurance policy?
They are tax free to terminally ill insured
Which of the following statements regarding deferred compensation funds is INCORRECT?
They are usually qualified plans
What is the main role of a solicitor of insurance?
To aid insurance agents in transacting insurance
Which of the following is NOT a goal of risk retention?
To minimize the insurer's level of liability in the event of loss
What is the purpose of a fixed-period settlement option?
To provide a guaranteed income for a certain amount of time
Under what circumstances would a life insurance contract qualify as a "standard policy?"
Under no circumstances
In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe?
Unilateral
Which of he following would be least likely to be considered a legitimate need that would be paid by insurance proceeds?
Vacation travel expenses
All of the following benefits are available under Social Security EXCEPT...
Welfare benefits
In forming an insurance contract, when does acceptance usually occur?
When an insurer's underwriter approves coverage
Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE?
Withdrawals are not taxable
