Simulate your exam

What is the maximum allowed value of promotional gifts that an agent may give to a prospective insured?

$100

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 The beneficiary would most likely receive twice the face value of the policy, since his fatal injuries were caused by an accident and he died within the 90-day benefit limit stipulated in most policies.

An employee will be taxed on the cost of group life insurance paid by the employer if the amount of coverage exceeds

$50,000. The cost of coverage paid by the employer in excess of $50,000 is taxed to the employee.

An annuity contract is issued to a senior consumer over age 65. What is the maximum surrender charge for a withdrawal of money allowed on this annuity?

10% An annuity contract issued to a senior consumer age 65 or older may not contain a surrender or deferred sales charge for a withdrawal of money from an annuity exceeding 10% of the amount withdrawn.

In order to maintain an insurance license, an agent licensed for less than 6 years will need to satisfy Florida's continuing education requirement of

24 hours

Regulations for annuity recommendations would apply when a consumer is, at least what age?

65

Which nonforfeiture option has the highest amount of insurance protection?

A Extended Term The Extended Term nonforfeiture option has the same face amount as the original policy, but for a shorter period of time.

Which of the following named beneficiaries would not be able to receive the death benefit directly from the insurer in the event of the insured's death?

A minor son of the insured

Which of the following documents delivered to the policyowner includes information about premium amounts, cash values, surrender values and death benefits for specific policy years?

A policy summary A policy summary usually includes all the listed information, and must be delivered along with a new policy.

Who is a third-party owner?

A policyowner who is not the insured Third-party owner is a legal term used to identify an individual or entity that is not an insured under the contract, but that has a legally enforceable right under it.

Level term insurance provides a level death benefit in the level premium during the policy term. If the policy renews at the end of a specified period of time, the policy premium will be

Adjusted to the insured's age at the time of renewal

What is reinsurance?

An agreement between a ceding insurer an assuming insurer

In insurance, an offer is usually made when

An applicant submits an application to the insurer

All of the following are examples of third-party ownership of a life insurance policy except

An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan.

What is a foreign insurer?

An insurer with a home office in another state A domestic insurer's home office is in this state, a foreign insurer's is in another state, and an alien insurer's is in another country.

An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his

Attained age

All of the following information about a customer must be used in determining annuity suitability except

Beneficiaries age

Which of the following is a feature of a variable annuity?

Benefit payment amounts are not guaranteed. Under a variable annuity, the issuing insurance company does not guarantee a minimum interest rate or the benefit payment amounts. The annuitant's payments into the annuity are invested in the insurer's separate account. Agents selling variable annuities are required to have a securities license in addition to their life agent's license.

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

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.

All of the following are duties and responsibilities of producers at the time of application, except

Change any incorrect statement on the application by personally initialing next to the corrected statement.

An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision?

Common Disaster Under the Uniform Simultaneous Death Law, Common Disaster provision, the law will assume that the primary beneficiary dies first in a common disaster as long as the beneficiary dies within this specified period of time following the death of the insured (usually 30 days). This provides that the proceeds will be paid to either the contingent beneficiary or the insured's estate, if no contingent beneficiary is designated.

An applicant for an insurance agents license must

Complete a prelicensing education course

Which provision of a life insurance policy states the insurance duty to pay benefits upon the death of the insured, and to whom the benefits will be paid?

Consideration clause

An insured pays an annual premium to his insurer. In return, the insurer promises to pay benefits in accordance with the terms of the contract. This is called.

Consideration. "Consideration" is the value offered by the insured to the insurer, and vice versa. The insured makes accurate statements in the application and remits premium payments. In exchange, the insurer provides benefits as stipulated in the contract.

According to the entire contract provision, what document must be made part of the insurance policy?

Copy of the original application. An insurance contract must contain a copy of the original application.

An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation?

Decreasing term

The provision which states that both the policy and a copy of the application form the contract between the policy owner and the insurer is called the

Entire Contract

An agent's client needs additional insurance which the agent's own insurer cannot provide. The agent has to solicit additional coverage from another authorized insurer. This coverage is known as

Excess

Which of the following best describes the aleatory nature of an insurance contract?

Exchange of unequal values

Which policy component decreases in decreasing term insurance?

Face Amount decreasing term policies feature a level premium and a death benefit that decreases each year over the duration of the policy term.

What kind of policy does not typically require proof of insurability?

Group insurance Individual life insurance is written on a single life. The rate and coverage is based upon the underwriting of that individual. Group life insurance is written as a master policy, issued to the sponsoring organization, covering the lives of more than one individual member of that group. In group insurance, individual participants typically do not need to provide proof of insurability.

If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a

Guaranteed insurability rider. The Guaranteed Insurability rider allows the policyowner to purchase specific amounts of additional insurance at specific dates or events, without proving continued insurability. Rates for the additions are based upon attained age.

A return of premium term life policy is written as what type of term coverage?

Increasing- pays an additional death benefit to the beneficiary equally to the amount of the premiums paid

Which of the following policy components contains the company's promise to pay?

Insuring clause

Which of the following best describes annually renewable term insurance?

It is level term insurance. Annually renewable term is a form of level term insurance that offers the most insurance at the lowest cost.

Which of the following is true about the premium on the children's rider in a life insurance policy?

It remains the same no matter how many children are added to the policy

An insured buys a 5-year level premium term policy with a face amount of $10,000. The policy also contains renewability and convertibility options. When the insured renews the policy in 5 years, what will happen to the premium?

It will increase because the insured will be 5 years older than when the policy was originally purchased.

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?

Joint and survivor

A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this?

Level term A 20-year term policy is written to provide a level death benefit for 20 years.

Which of the following terms means a result of calculation based on the average number of months, the insured is projected to live due to medical history and mortality factors?

Life expectancy Life Expectancy is an important concept in life settlement contracts. It refers to a calculation based on the average number of months the insured is projected to live due to medical history and mortality factors (an arithmetic mean).

The form of life annuity which pays benefits throughout the lifetime of the annuitant and also guarantees payment for a minimum number of years is called

Life income with period certain. If the annuitant dies before the period certain, the payments continue to a beneficiary or the estate for the remainder of the period certain

Regarding the free-look provision, the insurance company

Must allow the policyowner to return the policy for a full refund.

On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are

Not taxable since IRS treats them as a refund of a portion off the premium paid

Which of the following entities is responsible for Agent, licensing and administrative supervision?

Office of Insurance Regulation

What is a definition of a unilateral contract?

One-sided: only one party makes an enforceable promise

A rider attached to a life insurance policy that provides coverage on the insured's family members is called the

Other-insured rider. The other-insureds rider is useful in providing insurance for more than one family member. The type of insurance offered by this rider is usually term insurance, with the right to convert to permanent insurance.

What is the major difference between a stock company and a mutual company?

Ownership Mutual companies are owned by policyholders, while stock companies are owned by stockholders.

A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will

Pay the policy proceeds only if it would have issued the policy

Who might receive dividends from a mutual insurer?

Policyholders A mutual insurer has no stock, and is owned by the policyholders. Since they may receive a dividend (not guaranteed), such policies are known as participating policies. Dividends received by policyholders of a mutual insurer are not taxable.

A couple owns a life insurance policy with a Children's Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability?

Proof of insurability is not required.

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

I 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

Required a premium increase each renewal

If an agent wishes to sell variable life policies, what license must the agent obtain?

Securities Variable products are governed in part by the Securities and Exchange Commission; therefore, agents selling variable life policies must also secure a securities license.

Which of the following is a risk classification used by underwriters for life insurance?

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.

Which of the following insurance products will be subject to the regulation on life insurance solicitation?

Term life policy.

Which of the following would qualify as a competent party in an insurance contract?

The applicant has a prior felony conviction

Which of the following is not the consideration in a policy?

The application given to a prospective insured

If a life insurance policy has an irrevocable beneficiary designation

The beneficiary can only be changed with written permission of the beneficiary

An applicant signs an application for a $25,000 life insurance policy, pays the initial premium, and receives a conditional receipt. If the applicant dies the following day, which is true?

The beneficiary will receive the full death benefit if it is determined that the applicant qualified for the policy.

Which of the following is an example of liquidity in a life insurance contract?

The cash value available to the policyowner. Liquidity in life insurance refers to availability of cash to the insured. Some life insurance policies offer cash values that can be borrowed at any time and used for immediate needs.

Which of the following dates must be contained in a policy summary

The date the summary was prepared. A policy summary must contain the date that the summary was prepared.

Who does the secondary addressee provision protect?

The insured over the age of 64. The secondary notice/addressee provision protects elderly insured. Coverage for persons age 64 and older that has been in force for at least 1 year cannot lapse for nonpayment of premium after expiration of the grace period without the insurer notifying the policyowner and a specified secondary addressee (if designated in writing by the policyowner) of the impending lapse in coverage.

In a life settlement contract, whom does the life settlement broker represent?

The owner. Life Settlement Broker is a person who, for compensation, solicits, negotiates, or offers to negotiate a life settlement contract. Life settlement brokers represent only the policyowners.

Which of the following is true regarding the premium in term policies?

The premium is level for the term of the policy

Which of the following best defines Target premium in a universal life policy?

The recommended amount that keep the policy in force throughout its lifetime

Which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child where the parent is the policy owner?

Third-party ownership Contracts that are owned by someone other than the insured are known as third-party ownership. Most policies involving third-party ownership are written in business situations or for minors in which the parent owns the policy.

What is the purpose of the buyers guide?

To allow the consumer to compare the costs of different policies

What is the purpose of establishing the Target premium for a universal life policy?

To keep the policy in force

The paid-up addition option uses the dividend

To purchase a smaller amount of the same type of insurance as the original policy.

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?

Universal Life (Universal Life policies allow for policyholders to withdraw a limited portion of the policy's cash value. Each withdrawal, however, is usually charged, and the amount and frequency of withdrawals are usually limited.)

Which of the following types of policies allows the policyowner to Skip premium payments, provided that there is enough cash value in the policy to cover the premium amount?

Universal life The policyowner has the flexibility to increase the amount of premium going into the policy and to later decrease it again. In fact, the policyowner may even skip paying a premium and the policy will not lapse as long as there is sufficient cash value at the time to compensate for the nonpayment of premium.

In forming an insurance contract, when does acceptance usually occur?

When an insurer's underwriter approves coverage

When would a 20-pay whole life policy endow?

When the insured reaches age 100

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?

consideration

All of the following information about the applicant is identified in the general information section of a life insurance application except

education

For a retirement plan to be qualified, it must be designed for whose benefit?

employees