Readiness Exam

A whole life policy is surrendered for a reduced paid-up policy. The cash value in the new policy will A. decrease over time B. remain the same C. reduce to the pre-surrender value D. continue to increase

D. continue to increase

All of the following are true regarding the federal fair credit reporting act EXCEPT A. insurers are not required to give customers a copy of the report B. it applies to credit reports ordered in connection with insurance, banking and employment C. the customer must be notified if adverse action is taken as a result of a report D. reports may be sent to anyone who requests one

D. reports may be sent to anyone who requests one

An insurance producer is defined as an individual who is licensed to A. adjust losses B. sell insurance C. offer advice for a fee D. evaluate risks

B. sell insurance

If the applicant's health is poorer than that of an average applicant, the policy may be issued A. standard B. substandard C. preferred D. ordinary

B. substandard

How long is the grace period for an individual life insurance policy A. 1 month B. 7 to 10 business days C. 2 weeks D. 3 months

A. 1 month

If a policy contains an unconditional refund offer, what is the latest point at which the buyers guide and policy summary may be issued? A. any point prior to collection of the first premium B. at the time of policy delivery C. any point prior to the delivery of the policy D. any point prior to the acceptance of the policy

A. any point prior to collection of the first premium

Which of the following are characteristics of term life insurance A. temporary protection, renewability, no cash value B. nonforfeiture provisions and living benefits C. coverage to age 100, cash value, and high premiums D. Adjustable premiums and automatic increases in face amount at any given age

A. temporary protection, renewability, no cash value

According to the life insurance replacement regulations, which of the following would be an example of policy replacement? A. term insurance is changed to a whole life policy B. a policy is reissued with a reduction in cash value C. a lapsed policy is reinstated within a specific timeframe D. a term policy expires, and the insured buys another term life policy

A. term insurance is changed to a whole life policy

Which department or division of an insurance company is responsible for the selection, evaluation, and distribution of risks A. underwriting B. marketing and sales C. actuarial D. claims

A. underwriting

The renewable provision allows the policyowner to renew the coverage at the expiration date A. with evidence of insurability if the insured risk has increased B. with evidence of insurability if the insurer requires it C. only with evidence of insurability D. without evidence of insurability

D. without evidence of insurability

Which of the following would be an example of an insurer participating in the unfair trade practice of discrimination A. charging the insured higher premiums based on their race B. charging the insured higher premiums based on life expectancy C. making malicious statements about the insured based on their race D. charging different premium rates to the insureds in different insuring classes

A. charging the insured higher premiums based on their race

The chief officer and head of the Tennessee Department of Insurance is A. commissioner B. NAIC C. superintendent D. govenor

A. commissioner

Under which of the following conditions would life insurance proceeds be taxable by the federal government A. if there is a transfer for value B. if paid out to the policy owner C. if taken as a lump sum D. if collaterally assigned to a lender

A. if there is a transfer for value

Which of the following terms refers to solicitation, negotiation, effectuation or advising related to an insurance contract? A. insurance transaction B. rescission C. insurable interest D. advertising

A. insurance transaction

Which of the following would be required to become licensed as an insurance producer A. an officer of an insured who does not receive commissions B. a customer service representative who solicits no more than one policy a year C. a person whose activities are limited to insurance advertising D. agency supervisor whose actions do not include selling insurance

B. a customer service representative who solicits no more than one policy a year

Which of the following is NOT an example of the company's location of incorporation A. domestic B. authorized C. alien D. foreign

B. authorized

Testimony, documents, or other evidence obtained by the Commissioner may NOT be used in which of the following situations A. an investigation of a producer B. an investigation of an agency C. a private civil proceeding against an agency or producer D. examination of a witness in an investigation

C. a private civil proceeding against an agency or producer

Which of the following would be TRUE of both the fixed-period and fixed-amount settlement options A. the size of installments decreases after certain period of time B. the amount of payments is based on the recipient's life expectancy C. both guarantee that the principal and interest will be fully paid out D. both guarantee payments for the life of the beneficiary

C. both guarantee that the principal and interest will be fully paid out

Which distribution(s) from a Modified Endowment Contract would be taxable as income at the time received to the extent that the cash value of the contract immediately before the payment exceeds the investment in the contract? A. policy loan B. partial cash surrender C. both partial cash surrender and policy loan D. neither partial cash surrender nor policy loan

C. both partial cash surrender and policy loan

Partners in a business want to make sure that if one of them were to pass away, their surviving family will receive a fair value for the portion in the business. What life insurance agreement would be most suited for transitioning the business A. deferred compensation plan B. split dollar plan C. buy-sell agreement D. executive bonus plan

C. buy-sell agreement

Which of the following is NOT a standard exclusion in life insurance policies A. hazardous occupation B. aviation C. disability D. war and military service

C. disability

When a whole life policy is surrendered for its nonforfeiture value, what is the automatic option A. reduced paid-up B. cash surrender value C. extended term D. paid-up additions

C. extended term

The owner of a deferred annuity pays $100 in premium one month, and $130 the next month. Which of the following terms best describes this premium payment arrangement? A. lump-sum premium B. level premium C. flexible premium D. single premium

C. flexible premium

Before suspending or revoking an insurance agency's license, the commissioner must first A. inform the NAIC B. assess a civil penalty of not less than $100 or no more than $1000 C. hold a hearing to determine if a violation has been committed D. advise the agency of the suspension in writing within 30 days

C. hold a hearing to determine if a violation has been committed

If the commissioner denies an application for an insurance license, how should the applicant be notified A. by phone B. as deemed appropriate by the commissioner C. in writing D. by certified mail

C. in writing

What does the guaranty association guard against A. double indemnity B. insurance fraud C. insurer insolvency D. rebating

C. insurer insolvency

If an insurance company issues a policy even though some questions on the application were unanswered, when can the insurer get the answers to those questions A. at any time within the incontestable period B. within 3 months of issuing the policy C. never; the insured has waived its rights to those answers by issuing the policy D. within 30 days of issuing the policy

C. never; the insurer has waived its rights to those answers by issuing the policy

Which risk classification is representative of the majority of people in a certain age group and will similar lifestyles A. substandard B. declined C. standard D. preferred

C. standard

When term insurance is added to the main policy to enhance the policy or provide added benefit or coverage, it is called a A. future income rider B. guaranteed insurability rider C. term rider D. nonforfeiture option

C. term rider

Which of the following statements concerning the Medical Information Bureau is correct? A. all applicants for life insurance receive a copy of the findings of the life insurance medical examination B. the Medical Information Bureau report must be attached to each life insurance policy issued C. The Medical Information Bureau assists underwriters in evaluating and classifying risks D. information contained in the Medical Information Bureau report is available to all physicians

C. the Medical Information Bureau assists underwriters in evaluating and classifying risks

An individual has a $200,000 convertible term life insurance policy. If he chooses, he can A. convert to another term policy with a lower face amount without proof of insurability B. purchase an individual annuity for any face amount using the 1035 exchange privilege C. purchase another term policy and increase his death benefit without proof of insurability D. convert to a whole life policy for the same face amount without proof of insurability

D. convert to a whole life policy for the same face amount without proof of insurability

An applicant may challenge information discovered as a result of an investigative consumer report under which of the following acts? A. privacy protection act B. consumer credit protection act C. HIPAA D. fair credit reporting act

D. fair credit reporting act

An individual receives a lump-sum inheritance. He'd like to use the money to create a lifetime income since he'll be retiring soon. He purchases an annuity and wishes to receive payments beginning in 2 months. What did he buy A. single premium immediate annuity B. single premium deferred annuity C. flexible premium immediate annuity D. flexible premium deferred annuity

A. single premium immediate annuity

Which of the following policies can be described as a flexible premium adjustable life policy A. universal life B. whole life C. term life D. credit life

A. universal life

In a life insurance application, all of the following signatures will be required EXCEPT A. the owner (if different from the insured) B. the home office underwriter C. the agent D. the insured

B. the home office underwriter

Who is the annuity owner A. the insurer B. the person who purchases the annuity C. the person on whose life the annuity is written D. the person who receives the benefits

B. the person who purchases the annuity

The guaranteed insurability rider allows the owner to purchase additional amounts of life insurance without proof of insurability at all of the following EXCEPT A. birth of a child B. approximately every 3 years between ages of 25 and 40 C. marriage D. purchase of a new home

D. purchase of a new home

In this state, an unlicensed person may be compensated for a referral to a licensed insurance producer only if the compensation is a fixed amount, not to exceed what minimum dollar amount A. $100 B. $25 C. $50 D. $1000

B. $25

Which of the following statements is INCORRECT concerning MECs A. a primary purpose of the regulations governing MECs was to reduce incentives for the use of life insurance as a short term investment vehicle B. a life insurance policy failing the 7 pay test is classified as an MEC C. an MEC must always pass the 7 pay test D. a distribution from an MEC may be subject to a 10% penalty if withdrawn prior to 59 1/2

B. a life insurance policy failing the 7 pay test is classified as an MEC

A loss resulting from which of the following would qualify for the accidental death rider coverage? A. a health condition B. an automobile accident C. disability D. a hazardous hobby

B. an automobile accident

Which of the following is required in order for a plan to be qualified? A. The plan must not be permanent B. The plan must be formally written and communicated to the employees C. The plan must be for the exclusive benefit of the employer D. The plan's contribution formula is allowed to discriminate in favor of officers of the company

B. the plan must be formally written and communicated to the employees

All of the following statements about indexed whole life insurance are correct EXCEPT A. there is a guaranteed minimum interest rate B. the policy face amount remains level throughout the life of the policy C. the cash value depends on the performance of the equity index D. the premium is fixed

B. the policy face amount remains level throughout the life of the policy

An agreement that is enforceable by law is known as what kind of contract A. legal B. unilateral C. adhesion D. conditional

B. unilateral

In addition to the current year, for how many prior years must an insurer maintain claim records A. 5 years B. 4 years C. 3 years D. 2 years

C. 3 years

Insurers must maintain a record of all sales and solicitation materials for a period of A. 10 years B. 6 years C. 3 years D. 5 years

C. 3 years

A distribution from an employer-sponsored retirement plan or from an IRA is eligible for a tax-free rollover if it is reinvested in an IRA within A. 100 days B. 30 days C. 60 days D. 90 days

C. 60 days

All of the following are true of the Survivorship Life Policy EXCEPT A. it can insure more than 2 lives B. the premium is based on the age of each insured C. the death benefit is not paid until the last death D. the premium would be lower than in a joint life policy

C. the death benefit is not paid until the last death

With Adjustable Life, the owner can change all of the following EXCEPT A. the insured B. the death benefit C. the length of time the coverage will last D. the premium

C. the length of time the coverage will last

All of the following are consideration in an insurance policy EXCEPT A. the cash value in the policy B. the statements on the application C. the premium paid at the time of application D. the promise to pay covered losses

C. the premium paid at the time of application

The Commissioner may issue a temporary license in all of the following cases EXCEPT A. to the spouse of a deceased or disabled producer, for the purpose of selling the business B. to an employee assuming the duties of a disabled or deceased person, designated on a business entity license C. to the designated employee of a retiring licensed producer, for the purpose of continuing the business D. to the designee of a licensed producer who is called to active duty in the armed forces

C. to the designated employee of a retiring licensed producer, for the purpose of continuing the business

In order for a business partner to be eligible for a Keogh plan, he/she must work full-time and own at least how much of the business A. 33% B. 25% C. 10% D. 50%

D. 50%

A life insurance policy qualifies as a Modified Endowment Contract (MEC) if the amount of premium paid exceeds the amount that would have provided paid-up insurance in how many years A. the life of the policy B. 5 years C. 3 years D. 7 years

D. 7 years

Variable insurance and variable annuities are regulated by A. departments of insurance only B. NAIC C. SEC, FINRA, and departments of insurance D. SEC and FINRA only

D. SEC and FINRA only

Which of the following policies would NOT offer a policy loan option? A. Variable universal life B. Universal life C. Whole life D. Term life

D. Term life

The entire contract includes all of the following EXCEPT A. any riders or amendments B. the life insurance policy C. a copy of the application D. a buyer's guide

D. a buyer's guide

Rules of replacement apply to all of the following EXCEPT: A. whole life policies B. limited-pay policies C. Group life insurance D. annuities

D. annuities

A limited insurance representative may solicit and negotiate contracts for all of the following insurance products EXCEPT A. mortgage guaranty insurance B. crop hail insurance C. Portable electronics insurance D. automobile physical damage insurance

D. automobile physical damage insurance

Which of the following would NOT trigger the payment of accelerated death benefits A. terminal illness B. requiring an organ transplant for the insured to survive C. being permanently institutionalized D. being permanently disabled

D. being permanently disabled

Which of the following best describes life annuity with period certain option A. it guarantees benefit payments for life of the annuitant and for a specified period for the beneficiary B. the benefit payments cease with the death of the annuitant C. the maximum guarantee period is in 10 years D. it provides the highest monthly benefit for an individual annuitant

A. it guarantees benefit payments for life of the annuitant and for a specified period for the beneficiary

Which of the following is TRUE of level term insurance A. it is temporary protection B. the premium will increase or decrease based on current interest rates C. the policy endows at age 100 D. the policy offers nonforfeiture values

A. it is temporary protection

What is the most common name for a single policy that is designed to insure two or more lives with a standard premium, and that pays the death benefit upon the first death A. joint life B. survivorship life C. last survivor D. second-to-die

A. joint life

What does an annuity protect the annuitant against A. living longer than expected B. the financial impact caused by premature death C. leaving beneficiaries without income D. estate taxes

A. living longer than expected

Which of the following is NOT a mandatory policy provision in life insurance policies issued in this state A. other insureds B. entire contract C. grace period D. nonforfeiture benefits

A. other insureds

What is the purpose of requiring licenses for persons who transact insurance A. protect the general public B. generate income for the department of insurance C. be able to collect commissions D. protect insurance companies from incompetent insurance producers

A. protect the general public

Which of the following best describes a rebate? A. a producer requiring an insured to buy insurance from her as a condition to a loan B. a producer returning part of her commission to her client, as an inducement to buy C. a producer selling insurance primarily to himself, his family, and his friends D. a producer misrepresenting policy provisions or coverages at issue

B. a producer returning part of her commission to her client, as an inducement to buy

Answers to questions in an insurance application are called representations and, as such, they are A. absolutely true B. believed to be true to the best of the applicant's knowledge C. not true D. warranties

B. believed to be true to the best of the applicant's knowledge

An insurer mails an insurance policy to a new policyowner. When the insurer relinquishes control of the policy, the policy is considered A. relinquished B. delivered C. mailed D. issued

B. delivered

Under what circumstances will the contingent beneficiary receive the death benefit A. if designated by the primary beneficiary B. if the primary beneficiary dies before the insured C. if designated by the insured D. if the tertiary beneficiary dies before the insured

B. if the primary beneficiary dies before the insured

If a soliciting producer suspects that there could be misrepresentation on the part of the applicant for insurance, what must the producer do? A. change the applicant's answer to what the producer believes is correct B. inform the insurance company C. erase the answer once the applicant submits the application D. refuse the applicant

B. inform the insurance company

Which of the following is guaranteed under a variable whole life insurance policy A. interest rates B. minimum death benefit C. cash value D. stock performance

B. minimum death benefit

Cash value guarantees in a whole life policy are called A. cash loans B. nonforfeiture values C. living benefits D. dividends

B. nonforfeiture values

In order to reinstate a life insurance policy the insured must do all of the following EXCEPT A. pay back premiums B. pay next year's premium in advance C. pay any interest due on back premiums D. repay any outstanding loans and interest

B. pay next year's premium in advance

An individual purchases a life insurance policy and lists his parents as the beneficiaries. He is able to change beneficiaries at any time. What type of beneficiary designation does the policy have? A. irrevocable B. revocable C. primary D. contingent

B. revocable

Insurance contracts are unilateral in nature. What does that mean A. all parties to the contract exchange something of value B. Only one party makes a promise C. the insured must make a promise to pay the premium D. a promise is made only at the time of the policy application

B. only one party makes a promise

Which of the following is a permissible reason for insurance company to contest payment of a claim based on statements in the application? A. the application contains a correction B. the insured died too soon after applying for the policy C. the insurer has already paid out the expected amount of benefits for the year D. the application contains material misstatements

D. the application contains material misstatements

Which of the following bears the investment risk in a variable life insurance policy A. the financial adviser B. the insurer C. the agent D. the policyowner

D. the policyowner

Keogh (HR-10) plans are qualified plans for A. government employees B. public school teachers C. postal workers D. the self-employed

D. the self-employed