CA Life Insurance 2022
What would be an expense factor in an insurance program?
Mortality costs
Pam is the primary beneficiary of a life insurance policy and wants to let the death benefit accumulate and receive only the monthly investment proceeds. Which settlement option should she choose?
Interest Option
Which of the following in NOT a primary objective of insurance regulation?
Interpret policy provisions
Sharon is the policyowner of a $50,000 life insurance policy. Her son, Mike, is the beneficiary. If Sharon MUST obtain Mike's signature in order to change the beneficiary, what kind of beneficiary designation is this?
Irrevocable
Which of the following statements regarding a life insurance policy divided is TRUE?
It is the distribution of excess of funds accumulated by the insurer on participating policies
All of the following statements correctly describe the purpose of Social Security EXCEPT
It provides a source of income for a meaningful standard of living during retirement
The California Insurance Code requires that an insurer must have enough assists to cover its liabilities and for reinsurance of all outstanding risks. To remain solvent, it must also possess additional assets equal to what amount?
Its paid-in capital
What will the beneficiary receive if an annuitant dies during the accumulation period?
The greater of the accumulated cash value or the total premium paid
Which of these factors help determine an insured's life insurance premium?
avocation (hobby)
Preferred risk policies with reduced premiums are issued by insurance companies because the insured has
better than average mortality or morbidity experience
The period in which there are no Social Security benefits for the surviving spouse is called the
blackout period
Proceeds from a life insurance policy are protected from the beneficiary's creditors by which clause?
spendthrift trust clause
According to the California Insurance Code, what term is used to describe a fact so important it could affect the policy premium?
Materiality
The importance of a representation is demonstrated in what rule?
Materiality of concealment
Which of the following describes the number of deaths in a year compared to the number of people in a select group?
Mortality rate
The free-look provision gives the policyowner
the right to return the policy for a full refund within a specified number of days
Under a contract of adhesion,
the terms must be accepted or rejected in full
Legal purpose is a term used in contract law meaning
there must be legal reasons for entering into the contract
Which of the following statements correctly describes a contract of indemnity?
One party is restored to the same financial position the party was in before the loss occurred
Which of the following statements do NOT apply to child coverage in a family policy?
Only children born prior to policy's issue date may be included
How are survivorship life insurance policies helpful in estate planning?
Provide funds to help pay taxes
What is the primary reason for buying an annuity?
Provide future economic security
Which of the following is NOT a requirement for a terminated employee that has exercised the conversion privilige?
Provide proof of insurability
Non-deductible contributions are typically associated with a
Roth IRA
Which market index is normally associated with an indexed annuity's rate of return?
S & P 500
Which of the following enables a life policy to be replaced with another life policy and results in the postponement of the tax consequence?
Section 1035 exchange
The California Life and Health Insurance Guarantee Association covers all of these types of policies, EXCEPT
Self-funded plans
Karen is a producer who has obtained personal information about a client without having a legitimate reason to do so. Under the McCarran-Ferguson Act, what is the minimum penalty for this?
$10,000
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
According to the California Insurance Code, what is the maximum penalty per violation for anyone who unwilfully commits an unfair method of competition?
$5,000
Employer-provided group term life insurance is exempt from income taxation up to
$50,000
Employee participation in a noncontributory group life plan must be
100%
Tonya has replaced her whole life policy with an annuity without incurring a tax penalty. This transaction is called a(n)
1035 Exchange
How long is a person expected to be disabled in order to receive Social Security disability benefits?
12 months
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
The free-look period for life insurance policyowners age 60 or older is
30 days
How many months can a life insurance policy normally be backdated from the date of application?
6
At what age is a surviving spouse without dependents eligible for Social Security survivor benefits?
60
According to the California Insurance Code, what is "insurance"?
A contract
Who is NOT eligible for Social Security survivor benefits?
A deceased worker's dependent parent of any age
Upon policy delivery, which of the following must a producer have an applicant sign if no initial premium was collected with the life insurance application?
A good health statement
A Modified Endowment Contract (MEC) is best described as
A life insurance contract which accumulates cash values higher than IRS will allow
Which of the following employers is required to follow ERISA regulations?
A local electrical supply company with 12 employees
Which of the following is an example of the insured's consideration?
A paid premium
What is an "insurance broker" according to California Insurance Code?
A person compensated for transacting insurance on behalf of another person with a insurer
Which of the following is NOT considered advertising?
A rating from a rating company, such as A.M Best
How is a life insurance policy dividend legally defined?
A return of excess premium and not taxable
what is the insurance term the State of California uses for an insurer that is eligible to transact business in this state?
Admitted
Which of the following is NOT considered to be an unfair claims settlement practice?
Advising a claimant to hire an attorney
When does as immediate annuity begin making payments?
After the first premium has been paid
An error was made on Mary's life insurance application. Which of the following areas are errors commonly made on applications for which the incontestable clause does NOT apply? Marital status Age Address Income
Age
which scenario would most life insurance policies exclude coverage for?
An individual who has a hobby racing cars once a month
Which of the following pieces of information is NOT gathered during the personal financial planning process?
An individual's civic organization memberships
Life insurance surplus must be distributed to policyowners at what frequency?
Annually
The deeds and actions of a producer indicate what kind of authority?
Apparent
Which of the following is NOT a true description of non-medical life insurance?
Applicants are not required to answer medical questions on the application
An applicant has revealed conditions that require more information. Which of the following is needed next?
Attending physician's statement
Why are dividends from a mutual insurer not subject to taxation?
Because dividends are considered to be a return of premium
Which statement is NOT true regarding Social Security benefits?
Benefits are design to replace the entire amount of the worker's earnings
Which of the following is NOT part of an insurance contract?
Certificate of Authority
Tim is covered under a group plan and would like to change his group coverage to an individual policy with the same insurer because of employment termination. Which of these describes the change that will take place?
Conversion
Tim was recently terminated from his employment and opted to change his existing group term life insurance to individual permanent life insurance. What is this process called?
Conversion
Which of these statements concerning Traditional IRAs is CORRECT?
Earnings are taxable when withdrawn
In what part of an insurance policy are policy benefits found?
Declarations
All of the following are examples of a Business Continuation Plan EXCEPT
Deferred Compensation
According to the California code governing claim settlement practices, which of the following is NOT considered to be an act of unfair discrimination?
Denial of a claim based on reckless behavior
Failure to report background changes within 30 days as required under section 1729.2 of the California insurance code could subject a license or applicant to
Denial, Fine, Suspension (All of these)
What is the primary purpose of a rating service company such as A.M Best?
Determine financial strength of an insurance company
What area of group health insurance is regulated under the Employee Retirement Security Act of 1974 (ERISA)?
Disclosure and reporting
Which of the following is NOT a component of determining policy premiums?
Dividends
Lisa has recently bought a fixed annuity. Which of these is considered to be a disadvantage of owning this type of annuity?
During periods of inflation, annuitants will experience a decrease in purchasing power of their payments
What is the name of the provision states that a copy of the application must be attached to the policy when issued?
Entire Contract
Peter has a policy where 80% to 90% of the premium is invested in traditional fixed income securities and the remainder of the premium is invested in contracts tied to a stipulated stock index. What kind of policy is this?
Equity index whole life
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 this party concerning an applicant. Which law do all insurers and their producers need to comply with?
Fair Credit Reporting Act
When handling premiums for an insured, an agent is acting in which capacity?
Fiduciary
All of these are characteristics of a universal life insurance policy EXECPT
Fixed surrender
Which type of worker has Social Security benefits available to them?
Fully insured
An annuitant is guaranteed to NOT outlive their benefits with a(n)
Guaranteed lifetime withdrawal benefit
What is an insurance solicitor authorized to do?
Help an agent or broker sell insurance
Which of these is a method of determining the level of funds required for ongoing support in the event of the breadwinner's death?
Human life value
What prevents a life insurance policy from being rescinded by the insurer after being in force for two years?
Incontestability clause
Which of the following contracts is defined as "one that restores an injured party to the condition that was present before the loss?
Indemnity contract
Which type of beneficiary should be named if the insured wants to give explicit directions on how the policy proceeds should be paid?
Individual
All of the following are characteristics of a Group Life Insurance EXCEPT
Individual underwriting
Which of the following is present when an applicant stands to lose value if the insured dies?
Insurable interest
Who is responsible for assembling the policy forms for insureds?
Insurance carriers
The Do Not Call Registry offers exemptions for calls placed from all of the following EXCEPT
Insurance sales calls
According to the California Insurance Code, who is responsible for submitting a life agent's appointment?
Insurer
Which of the following signatures is not required on an individual insurance application?
Insurer
When calculating life insurance premium rates, which component would an agent's commission fall under?
Insurer's expenses
Which of the following does the California Insurance Code NOT require an insurance policy to specify?
Insurer's financial rating
Jim is applying to become an insurance agent and has a past misdemeanor conviction that was later expunged due to California Penal Code 1203.4. Which of the following statements is correct?
Jim must still disclose the conviction on his insurance license application
The California Insurance Code has authorized standards for names used by life insurance agents. Which of the following, if any, are automatically acceptable for Lance Manyon, a holder of the CLU designation?
Lance Manyon Insurance Services
Which of the following best describes the statement "The more times an event is repeated, the more predictable the outcome becomes"?
Law of large numbers
Insurance companies determine risk exposure by which of the following?
Law of larger numbers and risk pooling
What type of license required for an individual who charges a fee to review an insured's existing life insurance policy?
Life and disability analyst
All of the following are examples of pure risk EXECPT
Losing money at a casino
Which of the following is considered to be any situation that has the potential for loss?
Loss exposure
What does the insurance term "indemnity" refer to?
Make whole
What is involved when a life insurance policy has been backdated?
Making the policy effective on earlier date than the present
Which word implies permissiveness according to the California Insurance Code?
May
Most U.S. life insurance companies belong to the
Medical Information Bureau
How does underwriting differ between group life and individual life insurance?
Medical questions must be answered on individual life insurance
Which of the following does the California Department of Insurance (CDI) have NO jurisdiction over?
Medicare
Mike and Ike are 30 year old identical twins. Both are in excellent health. Each brother purchases a life policy that has a $750 annual premium. Mike buys a 10-year renewable term policy. Ike purchases a whole life policy. All of the following statements are true EXCEPT
Mike has the option of using his cash value to purchase a reduced amount of paid-up whole life insurance
Which of the following acts is NOT a Federal offense committed by an insurance agent?
Misrepresentation on an insurance applicantion
What is the proper order of initial life insurance premiums, from lowest to highest?
Modified premium, ordinary life, single premium
Which of the following describes the increase in the probability of a loss due to an insured's dishonest tendencies?
Moral hazard
Joanne has a $100,000 whole life policy with an accumulated $25,000 of cash value. She would like to borrow $15,000 against the cash value. Which of the following statements is TRUE?
Net death benefit will be reduced if the loan is not repaid
How are Roth IRA's treated for tax purposes?
Non-deductible contributions and tax-free distributions
Shirley has a $500,000 10-year non-renewable level term life policy. If she dies 15 years after the policy's inception date, hoe much will her beneficiary receive?
Nothing
What is required after a life agent sells an insurance policy to an applicant without being appointed by the insurer?
Notice of appointment must be submitted to the Commissioner
An interest-sensitive life insurance policyowner may be able to withdraw the policy's cash value interest free. The provision that allows this is called
Partial Surrender
What is an insurance policy's grace period?
Period of time after the premium is due but the policy remains in force
According to the California Insurance Code, how is the word "may" interpreted?
Permissive
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
A person who is a nonsmoker, of average weight, and in excellent health would most likely be in which risk classification?
Preferred
AAA Insurance Company has transferred a portion of its loss exposure to BBB Insurance Company. In this reinsurance transaction, what is AAA Insurance Company called?
Primary insurer
Which of the following is NOT considered to be a definition of the term "loss"?
Probability that an event will occur
Which of the following is NOT considered to be an act of insurance solicitation?
Publishing a magazine where one of the advertisers is an insurer
Dana is an employee who deposits a percentage of her income into her individual annuity. Her company also contributes a percentage into a separate company pension plan. What kind of annuity is this considered?
Qualified retirement annuity
What is the price of insurance for each exposure unit?
Rate
When intentional concealment is involved, what course of action is the injured party entitled to?
Recession of the contract
A life insurance company has transferred some of its risk to another insurer. The insurer assuming the risk is called the
Reinsurer
Which course of action is the insurer entitled to when deliberate concealment is committed by the insured?
Rescinding the contract
Which of the following is a situation where there is a possibility of either a loss or a gain?
Speculative risk
An insurer's claim settlement practices are regulated by the
State insurance departments
Which of the following does NOT have to be included on life insurance policy illustrations?
Statement that all values and benefits are guaranteed
An insurer can be protected from adverse selection with which policy provision?
Suicide clause
The "blackout period" affects whose benefits?
Surviving spouse
Which type of multiple protection policy pays on the death of the last person?
Survivorship life policy
Which of these statements regarding the annuitant is CORRECT?
The annuitant's life expectancy determines the annuity payments
What is a corridor in relation to a Universal Life insurance policy?
The gap between the total death benefit and the policy's cash value
A creditor would be allowed rights to life insurance policy proceeds if which of the following beneficiaries is chosen?
The insured's estate
How do insurance predict the increase of individual risks?
The law of large numbers
Under the California Insurance Code, a licensee's license number must be printed at what size on all price quotes, business cards, and printed material?
The same size print as the licensee's phone number, fax number or address
What distinguishes a deferred annuity from an immediate annuity?
The time at which benefit payment start
Pete is a life agent who has misappropriated fiduciary funds to his own use. What is Pete guilty of?
Theft
What is the purpose of the Medical Information Bureau (MIB)?
To help underwriters evaluate risk
What does the term "indemnity" mean as it pertains to insurance?
To make whole
What is a common reason people purchase an annuity?
To protect against the risk of outliving their financial resources
An example of naming a beneficiary by class would be
To the children born of my union with Ned Jackson
A life insurance policy which contains cash values that vary according to its investment performance of stocks is called
Variable Whole Life
An annuity which is backed by a life insurer's separate account is called a(n)
Variable annuity
Bruce is involved in an accident and becomes totally and permanently disabled. His insurance policy continues in force without payment of further premiums. Which policy provision is responsible for this?
Waiver of premium provision
All of these statements concerning whole life insurance are false EXCEPT
When a whole life policy is surrendered, income taxes may be owed
When does a life insurance policy typically become effective?
When initial premium is collected and policy is issued
Which of these would be the best example of a limited pay life insurance policy?
Whole life policy with premiums paid up after 20 years
A hazard can be best described as
a condition that may increase the likelihood of a loss occurring
When an insurer has met the qualifications necessary to transact business in California, it is said to be
admitted
An insurance company entitled to transact business in California is called a(n)
admitted carrier
People with higher loss exposure have the tendency to purchase insurance more often than those at average risk. This is called
adverse selection
An individual most likely will have an insurable interest insuring a person's life if
an economic interest exists for the continuance of the insured's life
A change in an insurance application requires
an initial made by the applicant
A contract requires
an offer and acceptance of the contract terms
The systematic liquidation of a sum of money is provided by a(n)
annuity
A person who asset a right of recovery under an insurance policy is called
claimant
Life insurance policies will normally pay for losses arising from
commercial aviation
An agent's attempt to stop the replacement of an existing life insurance policy is known as
conservation
The least expensive option to pay off a 30-year mortgage balance would be
decreasing term life
A savings vehicle designed to first accumulate funds and then systematically liquidates the funds is called a(n)
deferred annuity
Level premium permanent insurance accumulates a reserve that will eventually
equal the face amount of the policy
A life insurance policy normally contains a provision that restricts coverage in the event of death under all of the following situations EXCEPT
fare-paying passenger
Victoria owns a life annuity and elects to receive annuity payments monthly for the remainder of her life with "ten years certain". Her annuity will make payments
for a minimum of 120 months and a maximum of the remainder of her life
An individual that has 40 quarters of coverage, for Social Security purposes, is considered to be
fully insured
An insured's status under Social Security can be described as
fully insured
Which policy provision protects the policyowner from unintentional lapse of the contract?
grace period
A life insurance rider that allows an individual to purchase insurance as they grow older, regardless of insurability, is called a(n)
guaranteed insurability rider
The Human Life Value concept is based on
income
Moral hazard is described as the
increased chance of a loss because of an insured's dishonest tendencies
The conversion privilege under a group life plan allows an employee to convert to a(n)
individual plan upon employment termination
Which settlement option involves having the proceeds remain with the insurer and earnings paid on a monthly basis to the beneficiary?
interest only
A limited payment whole life policy provides
lifetime protection
The suicide clause of a life insurance policy states that if an insured commits suicide within a stated period from the policy's inception, the insurer will only be liable for a return of premiums paid
minus indebtedness and without interest
A beneficiary change can occur
normally at any time during the policy term
A nonparticipating policy will
not pay dividends
A unilateral contract is one in which
only one party (the insurer) makes any kind of legally enforceable promise
The cause of a loss is referred to as a(n)
peril
According to the principle of Utmost Good Faith, the insured will answer questions on the application to the best of their knowledge and pay the required premium, while the insurer will deal fairly with the insured and it's
promise made
The Fair Credit and Reporting Act's main purpose is to
protect consumers with guidelines regarding credit reporting and distribution
In order to activate the reinstatement clause of a lapsed life insurance policy, the insured MUST
provide evidence of insurability to the insurer
A situation in which there is ONLY a chance of loss or non loss is a
pure risk
An annuity is primarily used to provide
retirement income
Anyone employed in California to assist an insurance agent in transacting insurance is called an insurance
solicitor
A terminated employee that has exercised the conversion privilege is able to convert
term insurance into permanent insurance
Premiums are best described as
the amount an insured pays per unit of coverage
Converting a group plan to permanent life insurance requires
the conversion being applied for within 31 days of termination
An insurer having a large number of similar exposure units is considered important because
the greater the number insured, the more accurately the insurer can predict losses and set appropriate premiums
An insured individual and the policy's beneficiary die from the same accident. The common disaster provision states the insurer will continue as if
the insured outlived the beneficiary
If the annuitant dies before the annuity start date,
the premiums paid plus interest earned will be given to the beneficiary
Dorian exercised a nonforfeiture option by using his life policy's cash value to purchase an extended term insurance option. When the term insurance expires,
the protection ends
An insurer that has been found using higher rates based on race, religion, or ethnicity is said to be engaging in
unfair discrimination
Paul has an existing annuity and is sold a new one, in which the new policy holds no greater financial benefit to him than the existing contract. This is considered a(n)
unnecessary replacement
Under a Traditional IRA, interest earned is taxed
upon distribution
A life insurance policy where the insured can choose where the cash value can be invested is called
variable life
Life insurance creates an immediate estate. This phrase means:
when the insured dies, a death benefit is paid
A renewable Term Life insurance policy allows the policyowner the right to renew the policy
without producing proof of insurability
A worker is entitled to Social Security disability benefits if all of the following are true, EXCEPT for:
worker cannot perform his or her current job, but is actively seeking other employment