Tx Life Insurance Practice Exam
Which life insurance rider typically appears on a Juvenile life insurance policy?
Payor Benefit rider payor benefit rider provides for waiver of premium if the adult-payor of the policy dies or becomes totally disabled.
Which of the following provisions guarantees that premiums will be waived if a juvenile life policy owner becomes disabled?
Payor clause
which of the following provisions guarantees that premiums will be waived if a judo life policy owner becomes disabled?
Payor clause
A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the
Policy Loan provision
Which is true concerning a variable universal life policy?
Policy owner controls where the investment will go and select the amount of the premium payment
When an employee is terminated, which statement about a group term life conversion is true?
Policy proceeds will be paid if the employee dies during the conversion period
On a life insurance policy, who is qualified to change the beneficiary designation?
Policyowner
under federal tax laws, what is the tax treatment for an employer providing $50,000 of a contributory group term life plan to all it eligible employees?
Portion of the premiums paid for by the employer may be a tax deduction
A policy owner is able to choose the frequency of premium payments through what policy feature
Premium Mode
Which statement is correct regarding the premium payment schedule for whole life policies?
Premiums are payable throughout the insured's lifetime/ coverage lasts until death of the insured
which of the following actions is NOT possible with a universal life policy?
Premiums may be applied as a credit against income tax
What determines the full amount of Social Security retirement benefits a qualified individual is entitled to receive
Primary Insurance Amount (PIA)
What determines the full amount of Social Security retirement benefits a qualified individual is entitled to receive?
Primary Insurance Amount (PIA)
A primary beneficiary has died before the insured in a life insurance policy. A contingent beneficiary is also named in the policy, which of the following will occur with the insured dies.
Proceeds will go to the contingent beneficiary
what is a consideration given by the insured, and the consideration clause of a life policy?
Promise to pay a death benefit to named beneficiary
S buys a $10,000 Whole Life policy in 2003 and pays an annual premium of $100. S dies 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did S include on the policy?
Return of premium rider
M purchased an Accidental Death and Dismemberment (AD&D) policy and named his son as beneficiary. M has the right to change the beneficiary designation at anytime. What type of beneficiary is his son?
Revocable
Which of the following are equity indexed annuities typically invested in?
S&P 500
S recently received a $500,000 lump sum retirement buy out from her employer. She would like to buy an annuity that will immediately furniture with a guaranteed income for life. What type of annuity is best suited for her situation?
Single Premium
how long can a cash surrender value payment be referred by the insurance company under the nonforfeiture law?
Six months
which type of plan allows an employer to give money to an employee for buying a life insurance policy, and also permits the employee to select a beneficiary?
Split-dollar plan
Why must an insurance applicant answer all questions on the application?
Statements and representations on the application are part of the consideration for issuing a policy
why must insurance application answer all questions on the application?
Statements and representations on the application are part of the consideration for issuing a policy
What kind of life insurance product covers children under their parent's policy?
Term rider
Who is liable when an insured suffers a loss on a policy sold by an agent through an insurer not authorized to conduct business in Texas?
The agent
The amount of monthly disability benefits payable under Social Security is affected by which of the following factors?
The amount of the benefits available from other sources
C is trying to determine whether to convert her convertible term life policy to whole life insurance using her original age or a teenage. What factor would affect her decision the most?
The cost
which statement regarding the change of beneficiary provision is true?
The policyowner can change the beneficiary
What is the basic function of annuity?
The systematic liquidation of accumulated funds
In Texas, how long must a policy being forced before an insurance company must pay death benefits for suicide?
Two years
Life insurance companies are required to establish and maintain an anti-money laundering compliance program, according to which federal regulation?
USA Patriot Act
which of the following is considered an element of a variable life policy?
Underlying equity investment
In an insurance contract, the insurer is the only party who makes a legally enforceable promise what kind of contract is this?
Unilateral Insurance contracts are unilateral. This means that only one party (the insurer) makes any kind of enforceable promise.
S, age 40, is looking to buy a Life Insurance policy that will allow for increases or decreases in coverage as his needs change. The policy best suited for S would be
Universal Life
what type of life insurance incorporates flexible prevented adjustable death benefit?
Universal life
how long does an insurance company appointment remain in force?
Until terminated
A _______ _______ Life Policy combines investment choices with a form of term coverage
Variable Universal
A life policy that contains a monthly mortality charge as well as self-directed investment choices is called a(n)
Variable universal life policy
what a misrepresentation on a life insurance policy application is discovered what action me insurance company take?
Void the policy, only if it is discovered during the contestable period, and proven to be material
a life insurance policy which ensures that the premium will be paid if the insured becomes disabled has What kind of rider attached
Waiver of Premium
When does a life insurance contract become effective if the initial premium is not collected during the application process?
When producer delivers policy and collects initial premium
An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?
When the conditions of the receipt are met
Which provision is NOT a requirement in a group life policy?
accidental
A policy owner may generate taxable income from which of the following divided options?
accumulation at interest
A Term Life rider offers the insured
additional life coverage
B owns a whole life policy with a guaranteed insurability option that allows him to purchase without evidence of insurability, stated amount of
additional whole life coverage at specified times
all are true statements regarding an underwriting process, except:
aids and HIV virus exams can be conducted in a discriminatory fashion
which premium schedule results in the lowest cost to the policy owner?
annual
Group life insurance policies are generally written as
annually renewable term
when can a policy owner change a revocable beneficiary?
anytime
At what time is the policy owner have insurable interest on the insured in order for a life policy to be valid?
at the time of the application
A certificate of ____ permits an insurance company to transact business in Texas
authority
Who is NOT required to sign a life insurance application?
beneficiary
All individuals covered under a group contract will receive a(n)
certificate
which of these actions taken on a policy owner uses life insurance policy as collateral for a bank loan?
collateral assignment
which of the following is not included in the life insurance illustration?
company's mortality table
T applies for life insurance policy it as told by the producer that the insurer is bound to the coverage, as of the date of the application or medical examination, which ever is later. Assuming that he is an acceptable risk what item is given to T?
conditional receipt
K has a life insurance policy where her husband is beneficiary and her daughter is contingent beneficiary. Under the Common Disaster clause, if K and her husband are both killed in an automobile accident, where would the death proceeds be directed?
daughter
P, age 50, purchased an annuity that P will fund with $500/ month for 15 years. The annuity will then pay P retirement payments after the 15 years. Which type of annuity did P purchase?
deferred
Why would the Insurance Commissioner examine the records of an insurance company?
determine the solvency of the company
which of the following does Social Security NOT provide benefits for
dismemberment
A variable insurance policy
does not guarantee a return on its investment accounts
At the age 45 and individual withdraws $50,000 from his qualify, profit sharing plan and then deposit this amount into a personal savings account. This action would result in:
income tax and a 10% penalty assessed apartments withdrawn from the qualified plant
A 55 year old recently received a $30,000 distribution from a previous employer's 401(k) plan, -$6000 with holding. Which federal taxes apply if none of the funds are rolled over?
income taxes plus a 10% penalty on $30,000
Which of the following actions require a policy owner to provide proof of insurability an adjustable life policy
increase face amount
A life insurance policy would be considered a wagering contract without
insurable interest
When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have
insurable interest in the proposed insured
Who makes the legally enforceable promises in a unilateral contract?
insurance company
In a Key Employee life insurance policy, the third-party owner can be all of the following, EXCEPT:
insured
In a life insurance contract, an insurance company's promise to pay stated benefits is called the:
insuring clause
Quarterly premium payments increase the annual cost of insurance because
interest to the insurer is decreased while the administrative costs are increased
A life insurance arrangement, which circumvents insurable interest, statues called
investor originated life insurance
If a corporation pays the premium on a group life policy for its employer is the corporation is required to report how much additional taxable income for each employee?
nothing
An insurance agent has a fiduciary responsibility to all of the following EXCEPT
other agents
Get a life insurance policy, which provision states Teresa life policy options does a D in the beneficiary and be the recipient of any financial benefits from the policy
owners rights
Insurance policies are considered aleatory contracts, because
performance is conditioned upon a future occurrence
Consumer reports requested by an underwriter during the application process of a life insurance policy can be used to determine
probability of making timely premium payments
I let her life insurance policy lapse eight months ago due to nonpayment. She can reestablish coverage under which of the following provisions?
reinstatement provision
which of these terms accurately defines an underwriter's assessment of information on a life insurance application?
risk classification
What is the Suicide provision designed to do?
safeguard the insurer from an applicant who is contemplating suicide
To terminate an agent's appointment, an insurance company must
send termination notice to the Texas Department of Insurance
The premiums paid by the employer for his employees group. Life insurance are usually considered to be
tax-deductible to the employer
which of the following statements about accumulated interest earned on dividends from an insurance policy is TRUE?
taxed as ordinary income
The consideration clause in a life insurance policy indicates that the policy owners consideration consist of a completed application and
the initial premium
The amount of coverage on a group credit life policy is limited to
the insured's total loan value
A level premium indicates
the premium is fixed for the entire duration of the contract
Under a Renewable Term policy,
the renewal premium is calculated on the basis of the insured's attained age
Under a renewable term policy
the renewal premium is calculated on the basis of the insured's attained age
Stranger-Owned Life Insurance (STOLI) is when a person purchases life insurance only to sell to a(n):
third-party with no insurable interest
The reason for backdating a policy is
to obtain a premium rate based on an earlier age
An example of an unfair claims settlement practice is
turning down a claim without providing the basis of denial
All of these are considered to be a benefit under Social Security, except for
unemployment
ABC Insurance Company is actively engaging in boycott, coercion, and intimidation that results in the unreasonable restraint of trade. ABC is committing a prohibited act under Texas insurance laws covering
unfair methods of competition
K purchased a Life insurance policy in 1986 which paid 10% interest in the early years of the policy. Twenty years after the purchase, she received a notice from the insurer stating that the policy will soon terminate unless a much-higher premium is paid because of falling interest rates. This type of policy is known as a(n) _________ life policy.
universal
The Cash value in a(n) _____ life policy may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors.
universal
A term life insurance policy matures
upon the insured's death during the term of the policy
A(n) ____ annuity pays benefits based on units rather than stated dollar amounts.
variable
A(n) _______ Life policy offers the owner investment in products such as money market funds, long-term bonds and equities.
variable
What type of annuity has a cash value that is based upon the performance of it's underlying investment funds?
variable
Term Life Policies that have the ability to be converted to permanent coverage may do so during a specific time period. This conversion period
varies according to the contract
Which part of life insurance policy are guaranteed to be true
warranty
which of these is considered a statement that is a shirt to be true and every aspect?
warranty
A foreign insurance company conducting insurance business in Texas
was formed under the laws of another state
what is required, for the agent was license has been revoked?
we at least five years before applying for a new license
what kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100?
whole life
individual participant personally received eligible rollover funds from a profit sharing plan. What is the income tax withholding requirements for the transaction?
20% is withheld for income taxes
A potential client age 40 would like to purchase a whole life policy that will accumulate cash value at a faster rate in the early years of the policy which of these statements made by the producer would be correct?
20-Pay Life accumulates cash value faster than Straight Life
What type of policy would offer a 40-year old the quickest accumulation of cash value?
20-pay life
The USA patriot act was enacted in
2001
N is a 40-year old applicant who would like to retire at age 70. He is looking to buy a life insurance policy with level premiums, permanent protection, and be paid-up at retirement. Which of these should N purchase?
30 Pay Life
What is the excise tax rate the IRS imposes on individuals aged 70 1/2 or older who do not take the required minimum distributions from their qualified retirement plan?
50%
___ of continuing education MUST be completed in the classroom classroom equivalent
50%
An IRA owner can start making withdrawals and not be subjected to a tax penalty beginning at what age?
59 1/2
An insurer may normally delay the payment of a cash value loan, or surrender value for up to
6 months
A temporary agents license issued by the commissioner of insurance is valid for up to ____ days
90
which of the following statements about noncontributory employee group life insurance is FALSE?
A minimum number of employees is required to participate
which of these is not a reason for a business to buy key person life insurance?
A pension deficiency if the key employee dies
C is a key employee at ABC Incorporated. If a key employee life policies purchased on her life, which of these statements would be true?
ABC is the policy owner, C is the insured, & ABC is the beneficiary
which of the following types of policies pays a benefit if the insured goes blind?
AD&D- Accidental Death & Dismemberment policy
The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called
Accidental Death and Dismemberment rider (AD&D)
B owns a whole life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability stated amount of
Additional whole life coverage at specified times
Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features?
Aleatory
which of the following features a group term life policy enables an individual to leave the group and continue his her insurance without providing evidence of insurability?
Conversion privilege
When a policy owner exchange the term policy for a whole life policy, without providing proof of good health, which of these apply?
Conversion provision
The Combination of Whole Life and _____ Term insurance is referred to as a Family Income Policy
Decreasing
What type of life policy has a death benefit that I just periodically and his written for a specific period of time?
Decreasing Term
Credit life insurance is typically issued with which of the following types of coverage
Decreasing term
A 45 year old woman $100,000 of a scratch off lottery ticket. She purchased an annuity that will pay her $1500 per month beginning at age 60 which of these annuities did the woman purchase?
Deferred fixed annuity
Which of these statements describe a modified endowment contract, MEC
Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract
Term insurance has, which of the following characteristics?
Expires at the end of the policy period
Which of the following nonforfeiture options offers the highest death benefit?
Extended term
which of these provisions is not required in a life insurance policies?
Extended term
what does a face about plus cash value policy pay upon the insured's death?
Face amount plus the policies cash value
What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of the 30 years?
Family Maintenance Policy
N, age 50, recently bought an annuity that will pay a guaranteed $2,000/month at age 70 for life. What type of annuity did N purchase?
Fixed Deferred
and insured is past due on his life insurance premium but it's still within the grace Period. What will the beneficiary receive if the insured dies during the grace period?
Full face amount minus any past due premiums
T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity. What will this transaction provide?
Income that cannot be outlived by the owner
How does an indexed annuity differ from a fixed annuity?
Indexed annuity owners receive credited interest tied to the fluctuations of the linked index
Which of the following groups may not be insured by a group life insurance policy?
Individuals who are related by blood
Which of these actions should a producer take when submitting an insurance application to an insurer?
Inform insurer of relevant information not included on the application
Who makes the legal enforceable promise is in a unilateral insurance policy?
Insurance company
Credit life insurance is
Insurance issued on a debtor to cover outstanding loan balances
Which of these needs is satisfied by Adjustable Life insurance?
Insured's need for flexible premiums
The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death is called a(n)
Insuring agreement
How are policyowner dividends treated in regards to income tax?
Interest on accumulations is taxed
B receives yearly dividends and interest from a participating life insurance policy. Which of these should B include as gross income for federal income tax purposes?
Interest only
which of these arrangements allows one to bypass insurable interest laws?
Investor-Originated Life Insurance
my license may be denied, suspended or revoked, if the licensee?
Is found guilty of misrepresentation obtaining license
What is the purpose of a policy summary?
It highlights the critical parts of the policy issued
On January 8, an applicant filled out an application for a life insurance policy but did not include the initial premium. The insurance company approved the application on January 14 and issued the policy January 15. The producer delivered the policy on January 26 and collected the first premium. When did the coverage become effective?
January 26
what type of life policy covers two lives in pays the face amount after the first one dies?
Joint Life Policy
K, age 45, and his wife, age 43, have three children. They purchase a Family Policy that covers K's wife to age 65. All of these situations will pay a death benefit EXCEPT
K's wife dies at age 66
A sole proprietor may use the plan ONLY if the employees of this business are included.
Keogh Pension Plan
Life insurance that covers an insurance whole life with level premiums paid over a limited time is called
Limited pay life
which of these is not relevant when determining the amount of personal life insurance needed?
Local unemployment rate
Which type of policy is considered to be overfunded, as stated by IRS guidelines?
Modified Endowment Contract
When a life insurance policy exceeds certain IRS table values, the result would create which of the following?
Modified Endowment Contract (MEC)
K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?
Modified Whole Life
All of these insurance products required agent to have proper FINRA securities registration in order to sell them except for
Modified whole life
which of the following statements is CORRECT about accelerated death benefits?
Must have a terminal illness to qualify
When will the hearing be held after a notice of hearing alleging participation in an unfair or deceptive acts serve to a license or insured by the commissioner?
No sooner than 6 days
P and Q are married and have three children. P is the primary beneficiary on Q's Accidental Death and Dismemberment (AD&D) policy and Q's sister R is the contingent beneficiary. P, Q, and R are involved in a car accident and Q and R are killed instantly. The Accidental Death benefits will be paid to
P only
P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability?
P will still receive declared dividends
Under the USA patriot act ensures are required to report receipt of cash payments in excess of
$10,000
K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
$20,000 death benefit
employees covered under a company group, life, playing with a $50,000 death benefit. What is the MAXIMUM amount a spouse may be insured for under this program?
$25,000
S buys a $50,000 whole life policy with a $50,000 Accidental Death and Dismemberment rider. S dies 1 year later of natural causes. How much will the insurer pay the beneficiary?
$50,000
T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay?
$50,000
E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Although E was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E's life insurance policy be directed to?
*F (In this situation, the proceeds from E's life insurance policy will go to F. Insurable interest only needs to exist at the time of application.)
what is the maximum number of employees earning at least $5000 at an employer can have in order to start a SIMPLE retirement plan?
100
A non-contributory plan requires ____ participation of all eligible employees
100%
A 15 year mortgage is best predicted by which kind of life policy?
15 year decreasing term
If it in Schertz age was a mistake it on the life insurance contract the misstatement of age provision requires there any death benefit payable would be
An amount that the premiums paid would have purchased at the current age
P is a forty year old woman and would like to purchase an annuity that will provide a lifetime income stream beginning at age sixty. Which of the following did she NOT buy?
An immediate annuity
What does the insuring agreement in a Life insurance contract establish?
An insurer's basic promise
Which product would best serve a retired individual looking to invest a lump-sum of money through an insurance company?
Annuity In this situation, an annuity would be recommended.
When an insurance application is taken by a producer, which of these statements is true
Any changes made on the application require the applicant's initials
at what time must a policy owner have insurable interest on the insured in order for a life policy to be valid?
At the time of application
A pilot applies for Life insurance. The insurer approves the application with a $10 additional monthly premium modification due to the risk involved. The pilot declines the additional premium modification. The insurer will then likely issue the coverage with a(n)
Aviation exclusion
P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take?
Beneficiary will be paid the Death Benefit
what is considered to be a characteristic of an immediate annuity?
Benefit payments start within one payment period of purchase
What type of employee welfare plans are not subject to ERISA regulations?
Church plans
N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take?
Claim will be denied
Which of these actions is taken a policyholder uses a life insurance policy as collateral for a bank loan?
Collateral assignment
The phrase "transacting business" includes
Collecting premiums
Which of the following correctly explains actions an agent should take if a customer wants to apply for an insurance policy?
Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company
Which of the following consists of an offer, acceptance, and consideration?
Contract Offer, acceptance, and consideration are all elements of a contract.
Insurance policies are offered on a take it, or leave it bases which make them
Contracts of Adhesion
S is close to retiring and would like to purchase a policy that will yield greater gains than bonds, but will still protect the principal with a minimum level or risk. Which product would S be advised to purchase?
Equity index insurance
when an individual is planning to protect his family with life insurance, one method of doing so it's called needs analysis. What exactly does needs analysis involve?
Establishes the needs of the individual and his dependents
which of these statements about a guaranteed insurability option rider is not true?
Evidence of insurability is required when the option is exercised
The purpose of the ___ period is to avoid an unintentional lapse of a life insurance policy
Grace
Tom has a qualified retirement plan with his employer that is currently considered to be 80% vested. How can this be interpreted?
If Tom's employment is terminated, 20% of the funds would be forfeited
Which of these is NOT a reason for purchasing life insurance on the life of a minor?
If both parents were to die, it would provide death benefits to the child
all of the following statements regarding a tax sheltered annuity (TSA) are true EXCEPT
Income derived from the TSA is received income tax-free
What provision in a life insurance policy states at the application is considered part of the contract
entire contract provision
what provision in a life insurance policy states at the application is considered part of the contract?
entire contract provision
N is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event N was killed while flying as a student pilot?
exclusion
A universal life policy is sometimes referred to as an unbundled life policy, because the owner can see the interest earned cost of insurance and the
expense charges
All of these are characteristics of an Adjustable Life policy EXCEPT
face amount can be adjusted using policy dividends
What is the monetary penalty for willfully violating a cease-and-desist order?
fine up to $500
The payments on Q's annuity are no less than $250 quarterly which of the following annuities does Q own?
flexible installment deferred
what is an organization that solicits insurance only to its members
fraternal benefit society
Variable Life products require a producer to
hold a Life Insurance license and a Securities license
I domestic insurance company in Texas is considered a company that
is incorporated and formed in Texas
Dividends paid from a life insurance policy are
issued by the insurer
and architecture firm with stand to lose a lot of money in the event of a death of his project manager, which type of policy should the firm purchase on its project manager?
key person life policy
What kind of premium there's a whole life policy have
level
An insured inability to perform two or more activities of daily living, may trigger which type of life policy rider?
long-term care
During a sales presentation for a participating life insurance policy, an agent MUST
make a prospect understand that dividends are NOT guaranteed
An employer that offers a qualified retirement plan to its employees is eligible to
make tax-deductible contributions to the plan
Which of these factors do not play a role in the underwriting of a life insurance policy?
marital status
Which unfair trade practice involves an agent, telling a prospective client that a policy dividends are guaranteed?
misrepresentation
Which of these is not an element of life insurance premiums?
morbidity rate
which of these is NOT considered to be an element of an insurance contract?
negotiating
