ARKANSAS LIFE INSURANCE EXAM
Ron has a life insurance policy with a face value of $100,000 and a cost of living rider. If the consumer price index has gone up 4%, how much may Ron increase the face value of the policy?
$4,000 ($100,000 X .04 = $4,000)
Ken is a producer who has obtained Consumer Information Reports under false pretenses. Under the Fair Credit Reporting Act, what is the maximum penalty that may be imposed on Ken?
$5,000
How long must an individual be unable to engage in any gainful activity due to physical or mental disability in order to qualify for Social Security Total Disability?
12 months To qualify, the disability must be expected to last, or have lasted, at least 12 months, or it must be expected to result in death
The standard grace period for a life insurance policy sold in Arkansas is
31 days
What is Arkansas' REQUIRED grace period for a life insurance contract?
31 days
A Roth IRA owner must be at least what age in order to make tax-free withdrawals?
59 1/2 and owned an account for a minimum of 5 years
An insured may continue coverage under a group plan during their total disability if the premiums are paid for how long?
6 months from the date the disability started
Within how many days must a Traditional IRA be rolled over to another IRA to avoid tax consequences?
60 days
Within how many days must a rollover be completed in order to avoid being taxed as current income?
60 days to complete the rollover to another IRA
Which of the following employers is required to follow ERISA regulations?
A local electrical supply company with 12 employees
Which is considered to be misrepresentation?
A producer guaranteeing a policy's dividends
Which dividend option would an insurer invest the policyowner's money and add any interest earnings as the dividends accrue?
Accumulation at Interest Option *invests the policyowner's money and adds interest earnings to the initial amount of the dividends
An underwriter's primary responsibility to an insurer is to protect against
Adverse Selection
What does the Group Life underwriting risk selection process help protect insurance companies from?
Adverse Selection
How does life insurance create an immediate estate?
After first premium is paid, the face amount may be available to the beneficiary
Which is true about an insurer's right to screen applicants for HIV?
An insurer can require a blood test for HIV
In Arkansas, replacement forms are required to be obtained for the replacement of which of the following
Annual Renewable Term (ART) insurance
Which of the following is considered to be the period when the accumulated value in an annuity is paid out?
Annuitization phase
An insurer may pay commissions directly to any person for services as a producer provided the producer is licensed and ________
Appointed
A type of group that has a constitution and bylaws and has been organized for purposes other than obtaining insurance is called a(n)
Association or labor group
What is implied authority defined as?
Authority that is not specifically given to an agent contract, but that an agent can reasonably assume to carry out his/her duties
A domestic insurance company in Arkansas MUST
Be organized under Arkansas Insurance laws
Donald is the primary insured of a life insurance policy and adds a children's term rider. What is the advantage of adding this rider?
Can be converted to permanent coverage without evidence of insurability
An example of replacement is:
Canceling a term life policy to buy a whole life policy
The coverage, conditions, and limitations in the master policy of a group contract can be found in which document?
Certificate of coverage and benefits
Jonas is a whole life insurance policyowner and would like to add coverage for his two children. Which of the following products would allow him to accomplish this?
Child term rider
What would happen if a life insurance applicant is given a conditional receipt from an insurance agent and then dies the next day?
Claim will be paid if application is approved
In Arkansas, which of the following is considered an Unfair Trade Practice?
Coercion
Which of the following basics is a producer's fiduciary responsibility?
Collecting premiums and paying them to the insurance company
Life insurance policies will normally pay for losses arising from
Commercial aviation
Field underwriting performed by the producer involves
Completing the application and collecting initial premium
Intentional withholding of material facts that would affect an insurance policy's validity is called a(n)
Concealment
An employee under a group insurance policy has the right to name a beneficiary and the right to:
Convert to an individual policy in the event of employment termination
Which is NOT an example of a Business Continuation Plan
Deferred Compensation
Which type of life insurance policy pays the face amount at the end of the specified period if the insured is still alive?
Endowment policy
Which is an annuity that is linked to a market-related index?
Equity-indexed annuity
A professional liability for which producers can be sued for mistakes of putting a policy into effect is called
Errors and omissions
Craig purchased a life insurance policy for enabling his heirs to pay estate taxes. What is this called?
Estate conservation
An insurance company needs to obtain personal information from a third party concerning an applicant. Which law do all insurers and their producers need to comply with?
Fair Credit Reporting Act
Elizabeth is the beneficiary of a life insurance policy. She is receiving the death benefit in payments of $10,000 per month until the principal and interest has been paid out. Which option was chosen?
Fixed amount
A foreign insurance company is defined as one that is
Formed under the laws of a state other than Arkansas
An insured's status under Social Security can be described as
Fully insured
Level premium term life insurance policies
Have premiums that are averaged over the policy period
Which approach predicts a person's earning potential and determines how much of that amount would be devoted to dependents?
Human life value approach
The power given to an individual producer that is not specifically addressed in his/her contract is considered what type of authority?
Implied
Simon has purchased a fixed immediate annuity. His payment amount will be dependent upon principal, interest, and the contract's
Income period
The principle of insurable interest, in regards to a life insurance contract, is accurately described in which statement?
Insurable interest can be based on the love and affection of individuals related by blood or law
The Do Not Call Registry offers exemptions for everything EXCEPT
Insurance sales calls
Who's signature is not required on an individual insurance application?
Insurer
Which of these is NOT considered to be a nonforfeiture option in a whole life insurance policy?
Interest only
An applicant's character and personal habits can be obtained for underwriting purposes from which source?
Investigative consumer report *detailed report that contains information on a consumer's character, general reputation, personal characteristics, or mode of living and is obtained through personal interviews with neighbors, friends, or associates of the consumer
A policy owner is prohibited from making any changes to the policy without the beneficiary's written consent under which beneficiary designation?
Irrevocable beneficiary
No one is allowed to act as a producer for any insurance company in Arkansas that
Is unauthorized to do business in Arkansas
Which type of life insurance is normally associated with a Payor Benefit rider?
Juvenile insurance *a Payor Benefit rider waives the premium ONLY in connection with juvenile insurance
The Arkansas Life & Disability Insurance Guaranty Association assures payment of benefits from insurance policies for insolvent insurers, and covers all of the following insured policies, EXCEPT:
Liability Insurance
A limited payment whole life policy provides
Lifetime protection
An insurers ability to make unpredictable payouts to policy owners is called:
Liquidity
Insurance premium is determined by each of the following factors EXCEPT
Liquidity
What is involved when a life insurance policy has been backdated?
Making the policy effective on an earlier date than the present
All of these are considered key factors in underwriting life insurance EXCEPT
Marital status
A type of insurer that is owned by its policyowners is called
Mutual
Which type of insurance company allows their policyowners to elect governing body?
Mutual
A life insurance claim which involves a per capita distribution of policy proceeds would be payable to the
Named living primary beneficiaries
_____ is NOT a source of information that can assist an underwriter in determining whether or not to accept a risk
National Association of Insurance Underwriters
If dividends are illustrated, the advertisement MUST state that the dividends are:
Not guaranteed
How are contributions made to a Roth IRA handled for tax purposes?
Not tax deductible
Shirley has a $500,000 10-year non-renewable level term life policy. If she dies 15 years after the policy's inception date, how much will her beneficiary receive?
Nothing
Which is NOT considered to be a risk factor in life insurance underwriting?
Number of children
What MUST the company do prior to conducting an HIV related test?
Obtain a written consent from the proposed insured
An example of rebating would be
Offering a client something of value not stated in the contract in exchange for their business
What kind of life insurance policy issued by a mutual insurer provides a return of divisible surplus?
Participating life insurance policy
Which situation accurately describes a reduced paid-up nonforfeiture option?
Policy has a decreased face amount
Variable life insurance and Universal life insurance are very similar. Which of these features are held exclusively by variable universal life insurance?
Policyowner has the right to select the investment which will provide the greatest return
Which describes the result of a modified endowment contract that failed to meet the seven-pay test?
Pre-death distributions are typically taxable
A person who is a nonsmoker, average weight, excellent health would fall into what risk classification?
Preferred
Andy the annuitant dies before the annuity start date. Which of the following is a TRUE statement?
Premiums paid plus interest earned is returned to the beneficiary
The _________ must provide an insured with proper disclosure concerning the replacement of a life insurance policy
Producer
The two major actions required for a policyholder to comply with the Reinstatement Clause are
Provide evidence of insurability, past due premiums
The promise of a discount in premium as an inducement to purchase insurance is an Unfair Trade Practice known as:
Rebating
Which is NOT considered to be a nonforfeiture option available to a policy owner?
Reduction of Premium
A policy owner may exercise which of these dividend options that uses the dividend to pay all or part of the next premium due?
Reduction of premium dividend option
What are an applicant's statements concerning occupation, hobbies, and personal health history regarded as?
Representation
A life insurance policy owner does NOT have the right to:
Revoke an absolute assignment
An insurers claim settlement practices are regulated by the:
State insurance departments
A(n) _____ license is issued by the Commissioner of Insurance to allow the personal representative of a deceased producer to provide service to existing policyowners
Temporary
Which is true regarding the annuitant?
The annuitants life expectancy determines the annuity payments
Which of the following statements is CORRECT regarding an individual applying for life or health insurance?
The applicants medical history may be analyzed and reported
Signatures for an insurance application MUST be obtained by the producer from all of the following sources EXCEPT
The beneficiary
Which is NOT a characteristic of the Accelerated Death Benefit option?
The benefit can be offered as a rider at a specific extra cost or may be at no cost
Krissa purchases a 10-year level term life insurance policy that has a death benefit of $200,000. Which of these statements is true?
The face amount and premium will remain constant over the 10-year period
A whole life insurance policy accumulates cash value that becomes
The policy loan value which the insured may borrow against
Pat owns a 20-pay life policy with a paid-up dividend option. Which of the following statements is true?
The policy may be paid up early by using policy dividends
Which does a life insurance policy summary normally include?
The policy's cash value
If the annuitant dies before the annuity start date,
The premiums paid plus interest earned will be given to the beneficiary
An insurer may pay a commission in which of the following scenarios?
To a licensed producer who is appointed with the insurer
J is a producer who has induced an insured through misrepresentation to surrender an existing insurance policy. What is J guilty of?
Twisting
Which of the following pertains to the analysis of an applicants personal information and determining whether insurance should be issued or declined?
Underwriting
In an insurance contract, the insurer is the only party legally obligated to perform. Because of this, an insurance contract is considered
Unilateral
Shawn, Mike, and Dave are brothers who have a $100,000 "first to die" joint life policy covering all three of their lives. If Mike dies first, the policy proceeds
Will no longer provide insurance protection
Converting a group plan to permanent life insurance involves
the conversion being applied within 1 month of termination
