Ultimate Study Guide - NC Life Insurance

Group life insurance is a single policy written to provide coverage to members of a group. Which of the following statements concerning group life is CORRECT?

100% participation of members is required in noncontributory plans.

The validity of the policy cannot be contested once it has been in force for at least how many years after its date of issue?

2 years

In North Carolina, the Commissioner serves a term of how many years?

4 years

Which of the following is the required number of participants in a contributory group plan?

75%

What are the most common penalties for violations of insurance statutes?

A cease and desist order, a fine, and license suspension or revocation

Who is an insurance agent?

A person authorized to sell, solicit and negotiate insurance contracts

Who is considered a nonresident agent?

An agent who resides and is licensed in another state, but who is authorized to transact insurance in this state

The LEAST expensive first-year premium is found in which of the following policies?

Annually Renewable Term

The death protection component of Universal Life Insurance is always

Annually Renewable Term

What are producers required to do in order to renew their license?

Complete CE hours and pay a renewal fee

Which of the following would be the beneficiary in credit life insurance?

Creditor

In increasing and decreasing term policies, which policy component fluctuates during the policy term?

Death benefit

The factor added to the net premium to cover the costs of the insurer in obtaining and maintaining the business is called

Expenses

Nonforfeiture values guarantee which of the following for the policyowner.

That the cash value will not be lost

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

What is the advantage of reinstating a policy instead of applying for a new one?

The original age is used for premium determination

Which of the following is TRUE regarding an indeterminate premium whole life policy?

The premium can be raised up to a guaranteed maximum rate.

The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive?

$100,000

An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy

$50,000

When an employee terminates coverage under a group insurance policy, coverage continues in force

31 days

Level term insurance provides a level death benefit and a 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 type of licensee represents the insurance company?

Agent

Which of the following is TRUE about credit life insurance?

Creditor is the policyowner.

What does "level" refer to in level term insurance?

Face amount

The two main categories of policy loan interest rates are

Fixed or variable

Which of the following is NOT a characteristic of universal life insurance?

Fixed premium

Annually renewable term policies provide a level death benefit for a premium that

Increases annually

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.

An individual who sells insurance solely as a foreign military sales agent works with a

Restricted license

When changing a beneficiary through an endorsement method, what is the policyowner required to do?

Submit a request for change to the home office of the insurer

In a fixed annuity, which of the following is true regarding the guaranteed interest rate on the investment?

The annuitant will receive the higher of either the guaranteed minimum rate or current rate

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

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?

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

When can the Commissioner or Director examine insurers?

Whenever deemed necessary, but at least once every few years

Under the L&H Guaranty Association, the maximum benefit one contract holder may receive in benefits, regardless of the number of contracts held, is

$5,000,000

How long is a free-look period for replacement policies?

30 days

Which of the following acts would be grounds for a person's license suspension, revocation, or refusal to renew?

An agent fails to pay state income tax

If a licensee is convicted of a criminal violation, the licensee's insurance license is

Automatically suspended

Life insurance death proceeds are

Generally not taxed a income

Which of the following is used to determine interest rates on variable products?

Interest rate index

Variable Whole Life insurance is based on what type of premium?

Level fixed

Who can usually be granted a temporary license?

Producer's spouse or designee in case the licensed producer dies or becomes disabled

How must a replacing producer respond to an applicant wishing to replace existing life insurance?

The producer must provide the applicant with a Notice Regarding Replacement

An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1; however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy?

$9,800

How long does a North Carolina Agent have to notify the Department of Insurance in the event of a change in residence address?

10 business days

Insurance companies are required to provide proof of loss forms to the claimant within how many days after receipt of notice of loss

15 days

Within how many months must a person be expected to die from a sickness in order to be classified as terminally ill for the purposes of a viatical settlement?

24 months

Which of the following is INCORRECT regarding a $100,000 20-year level term policy?

At the end of 20 years, the policy's cash value will equal $100,000.

What type of licensee represents the insured?

Broker

When a policyowner designates a group of individuals as the beneficiary of a life insurance death benefit without specifically naming the individuals, this is called

Class designation

What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident?

Common Disaster Clause

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

If a producer makes maliciously critical statements about another insurer, what is this illegal practice called?

Defamation

Which of the following terms describes making false statements about the financial condition of any insurer that are intended to injure any person engaged in the business of insurance?

Defamation

In which of the following methods of changing a beneficiary does the policyowner send the contract to the home office of the insurer for approval and change?

Endorsement method

An agent selling variable annuities must be registered with

FINRA

For what reason can a temporary license be issued?

For continuation of business in case the licensed producer dies or becomes disabled

When an insurer requires a written proof of loss after notice of such loss has been given by the insured or beneficiary, the company must

Furnish a blank form to be used for that purpose

A Universal Life insurance policy has two types of interest rates that are called

Guaranteed and Current

According to the nonforfeiture law, if the owner decides to surrender a deferred annuity prior to annuitization, the owner is entitled to which of the following?

Guaranteed surrender value

A Return of Premium term life policy is written as what type of term coverage?

Increasing

Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost?

Indemnity

If an insurer accepts premium payments by credit card, who is responsible for paying the fees charged by a credit card company?

Insurer accepting payment

The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose?

Interest only option

An insured purchased a Life Insurance policy. The agent told him that depending upon the company's investments and expense factors, the cash values could change from those shown in the policy at issue time. The policy is a/an

Interest-sensitive Whole Life

When a reduced paid-up nonforfeiture option is chosen, what happens to the face amount of the policy?

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

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

Which statement is NOT true regarding a Straight Life policy?

Its premium steadily decreases over time, in response to its growing cash value - Straight Life policies charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit.

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

Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary?

Life income with period certain

Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?

Limited pay whole life

The premium of a survivorship life policy compared with that of a joint life policy would be

Lower

One of the advantages of a family life insurance policy that provides coverage for children is that it

May be converted to permanent insurance for the children without requiring evidence of insurability

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

Misrepresentation

What illegal act does a producer commit when the producer represents a policy in a more favorable light than the policy really is?

Misrepresentation

During replacement of life insurance, a replacing insurer must do which of the following?

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

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

Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured?

Option B

Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early?

Paid-up option

When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to

Purchase a single premium policy for a reduced face amount

Which nonforfeiture option provides coverage for the longest period of time?

Reduced Paid-Up

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

After three years of making payments into a flexible premium deferred annuity, the owner decides to surrender the annuity. The insurer returns all the premium payments to the owner, except for a predetermined percentage. What is this percentage called?

Surrender charge

A 27-year-old professional has limited income and can only budget $15 per month for life insurance. Which of the following life insurance policies would provide the largest face amount for that amount of premium?

Term insurance

If the Commissioner of Insurance is unable to complete their term,

The governor appoints a replacement.

An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT?

The insured may choose to convert to term or permanent individual coverage.

Who is responsible for the costs associated with the examination of insurers?

The insurer who is being examined

Which of the following best describes what the annuity period is?

The period of time during which accumulated money is converted into income payments

In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT

The type of investment.

Under a SIMPLE plan, which of the following is TRUE regarding taxation on both contributions and earnings?

They are tax deferred until withdrawn

Which of the following is true regarding taxation of accelerated benefits under a life insurance policy?

They are tax free to terminally ill insured

When the breadwinner that is insured by a Family Policy dies, what rights are provided to other family members that are covered under the policy?

They can convert their coverage to permanent life insurance without evidence of insurability.

When a licensee is accused of any act, omission, or misconduct that would subject the licensee to a license suspension or revocation, with the approval of the Commissioner, the license may be surrendered for a period of

Time to be set by the commissioner

To whom may a certificate of authority be issued?

To an insurer authorized to transact business in this state

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

To keep the policy in force

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

Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?

Universal Life - Option A

Which of the following statements would best describe the difference between viatical settlements and accelerated death benefits?

Viaticals are funded by a third party; accelerated death benefits are provided by the insurer that issued the original policy.

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

When an insurer's underwriter approves coverage