Texas life insurance exam part 3

#22. Which of the following components must a life insurance policy have to allow policy loans? a) Cash value b) Dividends c) Flexible premiums d) Face amount

a) Cash value

#32. For how long is an insurance company allowed to defer policy loan requests? a) 30 days b) 60 days c) 6 months d) 1 year

c) 6 months

#72. When possible, what should insurers strive to eliminate from illustrations? a) Policy amendments more than a page long b) Words they don't know c) Footnotes and caveats d) References to other products

c) Footnotes and caveats

#16. Which of the following is true about the mandatory free look in a Life Insurance policy? a) It applies only to term life insurance policies. b) It is optional on all life insurance policies. c) It commences when the policy is delivered. d) It commences when the application is signed.

c) It commences when the policy is delivered.

#59. Which nonforfeiture option provides coverage for the longest period of time? a) Extended term b) Paid-up option c) Accumulated at interest d) Reduced paid-up

d) Reduced paid-up

#23. When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy? a) It is reduced to the amount of what the cash value would buy as a single premium. b) It is increased when extra premiums are paid. c) It decreases over the term of the policy. d) It remains the same as the original policy, regardless of any differences in value.

a) It is reduced to the amount of what the cash value would buy as a single premium.

#14. Which of the following is INCORRECT concerning a noncontributory group plan? a) The employer pays 100% of the premiums. b) The employees receive individual policies. c) They help to reduce adverse selection against the insurer. d) They require 100% employee participation.

b) The employees receive individual policies

#41. An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-year term? a) The insured may renew the policy for another 10 years at the same premium rate. b) The insured may renew the policy for another 10 years, but at a higher premium rate. c) The insured must provide evidence of insurability to renew the policy. d) The insured may only convert the policy to another term policy.

b) The insured may renew the policy for another 10 years, but at a higher premium rate.

#68. All of the following would be considered an insurance transaction EXCEPT a) Advising a policyholder regarding a claim. b) Negotiating coverage. c) Obtaining an insurance license. d) Soliciting a policy.

c) Obtaining an insurance license

#39. 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? a) Common Disaster b) Accidental Death c) Survivor Life d) Second-to-Die

a) Common Disaster

#4. Under an extended term nonforfeiture option, the policy cash value is converted to a) A lower face amount than the whole life policy. b) A higher face amount than the whole life policy. c) The same face amount as in the whole life policy. d) The face amount equal to the cash value.

c) The same face amount as in the whole life policy.

#40. Social Security was created to provide all of the following benefits EXCEPT a) Disability income. b) Retirement income. c) Unemployment income. d) Survivor's benefits.

c) Unemployment income.

#92. Which of the following is the closest term to an authorized insurer? a) Certified b) Licensed c) Legal d) Admitted

d) Admitted

#44. Which statement is NOT true regarding a Straight Life policy? a) It has the lowest annual premium of the three types of Whole Life policies. b) Its premium steadily decreases over time, in response to its growing cash value. c) The face value of the policy is paid to the insured at age 100. d) It usually develops cash value by the end of the third policy year.

b) Its premium steadily decreases over time, in response to its growing cash value.

#90. 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 claims. The company is guilty of a) Rebating. b) Misrepresentation. c) Concealment. d) Unfair claim practice.

b) Misrepresentation.

#31. 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.

#27. All of the following benefits are available under Social Security EXCEPT a) Death benefits. b) Welfare benefits. c) Old-age and retirement benefits. d) Disability benefits.

b) Welfare benefits.

#42. The Ownership provision entitles the policyowner to do all of the following EXCEPT a) Set premium rates. b) Receive a policy loan. c) Assign the policy. d) Designate a beneficiary.

a) Set premium rates.

#63. The Commissioner of Insurance issues a Cease and Desist Order to an agent. If the agent wishes to contest the charges in court, how many days after the order was issued does the agent have to make the request? a) 10 days b) 30 days c) 60 days d) 90 days

b) 30 days

#26. All of the following statements concerning dividends are true EXCEPT a) Favorable investment results generate higher dividends. b) Dividend amounts are guaranteed in the policy. c) Lower insurance company costs generate higher dividends. d) They stem from favorable underwriting experience.

b) Dividend amounts are guaranteed in the policy.

#86. Which of the following is NOT true regarding a Certificate of Authority? a) It is equivalent to an insurance license. b) It is issued by the state department of insurance. c) It is issued to group insurance participants. d) It may be necessary for transacting business in a specific state.

c) It is issued to group insurance participants

#34. When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to a) Pay back all premiums owed plus interest. b) Receive payments for a fixed amount. c) Purchase a single premium policy for a reduced face amount. d) Purchase a term rider to attach to the policy.

c) Purchase a single premium policy for a reduced face amount.

#45. Which of the following is NOT the consideration in a policy? a) The premium amount paid at the time of application b) The promise to pay covered losses c) The application given to a prospective insured d) Something of value exchanged between parties

c) The application given to a prospective insured

#18. Which of the following is TRUE regarding the accumulation period of an annuity? a) It is also referred to as the annuity period. b) It is a period of time during which the beneficiary receives income c) It is limited to 10 years. d) It is a period during which the payments into the annuity grow tax deferred.

d) It is a period during which the payments into the annuity grow tax deferred.

#37. Which of the following is true about the premium on the children's rider in a life insurance policy? a) It decreases when the oldest child reaches the age of 21. b) It increases when a newborn baby is added to the policy. c) It decreases when an adopted child is added to the policy. d) It remains the same no matter how many children are added to the policy.

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

#54. Which of the following information will be stated in the consideration clause of a life insurance policy? a) The parties to the contract b) The time period allowed for the payment of premium c) The conditions for insurability d) The amount of premium payment

d) The amount of premium payment

#80. An agent discovers his newest client was the result of a referral. To show his thanks to the referring customer, the agent could a) Offer the customer money for every referral she brings in. b) Thank the customer. c) Return the customer's first premium of a new policy. d) Send the customer a gift as a token of appreciation.

b) Thank the customer.

#7. Annually renewable term policies provide a level death benefit for a premium that a) Decreases annually. b) Remains level. c) Fluctuates. d) Increases annually.

d) Increases annually

#49. What is the main purpose of the Seven-pay Test? a) It requires level premium payments for 7 years. b) It ensures that the policy benefits are paid out in 7 years. c) It guarantees the minimum interest. d) It determines if the insurance policy is a MEC.

d) It determines if the insurance policy is a MEC

#69. The initial amount of credit life insurance may NOT exceed a) An amount set by statute and adjusted regularly for inflation. b) The borrower's monthly income. c) The borrower's annual income. d) The amount to be repaid under the contract.

d) The amount to be repaid under the contract.

#17. 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 a) Statement of good health. b) Backdated receipt. c) Warranty. d) Premium receipt.

d) Premium receipt.

#30. If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant a) With the policy. b) Upon issuance of the policy. c) Within 30 days after the first premium payment was collected. d) Prior to filling out an application for insurance.

a) With the policy.

#74. 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 c) Guarantee a replacement for each existing policy d) Designate a new producer for a replaced policy

b) Obtain a list of all life insurance policies that will be replaced

#53. The death protection component of Universal Life Insurance is always a) Decreasing Term b) Annually Renewable Term c) Whole Life d) Adjustable Life

b) Annually Renewable Term

#50. In forming an insurance contract, when does acceptance usually occur? a) When an insurer delivers the policy b) When an insurer receives an application c) When an insured submits an application d) When an insurer's underwriter approves coverage

d) When an insurer's underwriter approves coverage

#48. All of the following information about the applicant is identified in the General Information section of a life insurance application EXCEPT a) Occupation. b) Education. c) Age. d) Gender.

b) Education.

#29. The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change? a) The death benefit can be increased only when the policy has developed a cash value. b) The death benefit can be increased only by exchanging the existing policy for a new one. c) The death benefit can be increased by providing evidence of insurability. d) The death benefit cannot be increased.

c) The death benefit can be increased by providing evidence of insurability.

#6. 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? a) The insured will have to pay premiums for 6 months. If at the end of this period the father is still disabled, the insured will be refunded the premiums. b) The insured's premiums will be waived until she is 21. c) The premiums will become tax deductible until the insured's 18th birthday. d) Since it is the policyowner, and not the insured, who has become disabled, the life insurance policy will not be affected.

b) The insured's premiums will be waived until she is 21

#51. All of the following are examples of third-party ownership of a life insurance policy EXCEPT a) An insured couple purchases a life insurance policy insuring the life of their grandson. b) A company purchases a life insurance policy on their manager, who is an important part of the operation. c) When an insured purchased a new home, the insured made an absolute assignment of a life insurance policy to the mortgage company. d) An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan.

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

#82. All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT a) An offer of employment. b) Stocks, securities, or bonds. c) An offer to share in commissions generated by the sale. d) Dividends from a mutual insurer.

d) Dividends from a mutual insurer

#93. A participating insurance policy may do which of the following? a) Provide group coverage b) Pay dividends to the stockholder c) Require 80% participation d) Pay dividends to the policyowner

d) Pay dividends to the policyowner