Exam

Adam is a licensed insurance counselor in Michigan. Which statement best describes his authority?

He provides advice regarding insurance policies and charges a fee for such advice.

Which of the following most accurately describes "insurable interest" in a life insurance policy?

Insurable interest is the financial relationship at the time of application between the person applying for life insurance and the person whose life is to be insured.

the Michigan Life and Health Insurance Guaranty Association. Melanie's practice is considered Melanie, a licensed producer, often reminds prospective clients that the policies she sells are protected by

Prohibited as an unfair trade practice

Samantha, Trudy, Raul, and Justin are applying for producers' licenses in Michigan. The Director will probably NOT waive the prelicensing and examination requirements for which applicant?

Raul, who holds undergraduate and graduate degrees in accounting

Which insurance sales distribution arrangements is NOT affiliated with just a single insurance company but instead represents multiple companies?

an independent sales office that is managed by a Personal Producing General Agent (PPGA)

For a life insurance contract to be enforceable, which of the following parties must be legally competent?

applicant and insurer

Life insurance underwriters are most likely to request a consumer (inspection) report on which of the following?

applicants who are seeking very high amounts of life insurance

When underwriting group life insurance, the underwriter can offset the risk of loss posed by the group by doing all of the following, EXCEPT:

denying insurance coverage to any person with a pre-existing condition

Most states permit insurers to include a provision in their life insurance policies that does which of the following?

excludes coverage of death that occurs while the insured is operating an aircraft

The Director of Insurance may issue a cease and desist order against a producer for all of the following reasons EXCEPT

failing to meet sales quotas

Barbara is an employee who has group life coverage through her employer. Which of the following most likely describes the type of policy covering Barbara?

group annually renewable level term life insurance

Agent Tom just sold a Medicare supplement policy to his client, Matilda. Which of the following acts would violate his fiduciary duties?

having Matilda make the check for the premium payable to Agent Tom

To renew a term life insurance policy at a lower re-entry rate than the guaranteed rate, what must the insured prove?

his or her insurability

Which of the following is the main appeal of joint life insurance compared to separate policies covering two lives?

lower cost

Which of the following do variable life insurance premiums generally include to cover the cost of managing the investment element of the contract?

maintenance fee

All the following uses for life insurance in a business represent a valid insurable interest, EXCEPT:

might occur when that customer dies. Life insurance purchased on an important customer to make up for the financial losses that might occur when they die

From an insurance risk perspective, an applicant engaging in adverse selection is demonstrating which type of hazard?

moral hazard

The fact that ownership of a health insurance contract cannot be transferred to another party makes it what type of contract?

personal

In which of the following areas may a life insurance underwriter discriminate in determining policy eligibility and coverage limits?

personal health history

A producer can be licensed in all of the following lines of insurance EXCEPT: variable life

personal trust

When collecting personal financial or health information, an insurance company is required to do all of the following EXCEPT:

provide individuals with copies of documents disclosed to other parties

professional basketball game in exchange for purchasing a life insurance Agent Johns started offering potential clients courtside tickets to a policy. Which ethical sales practice has Agent Johns violated?

rebating

With interest-sensitive whole life insurance policies, insurers may change premium rates after reviewing their investment experience in a process called:

redetermination

Genevieve wants to renew her Michigan insurance producer's license. Which of the following is not a condition for renewal?

report of insurance sales made in the last two years

All of the following are part of a producer's responsibilities to an applicant EXCEPT:

research other insurance companies' insurance products if requested by the applicant

In cases where an existing life insurance policy is going to be replaced by new life insurance policy, the producer must do all the following EXCEPT:

sign a form assuming full responsibility for any consequences that may result from the replacement

The basic purpose for the insuring clause of a life insurance policy is to:

state the insurer's promise to pay the death benefit to the named beneficiary if the insured dies

An insurer may recoup acquisition fees associated with the sale insurance by assessing a cash value withdrawal fee called a(n): and administration of universal life

surrender charge

To be eligible for group life insurance, a group must generally cover at least how many people under one master policy?

10

An insurer must notify its current customers of its privacy policies or practices at least once every how often?

12 months

Endowment contracts issued today no longer qualify as life insurance (for tax purposes), but those issued before what date were grandfathered and still retain favorable life insurance taxation?

1986

All the following are standard life insurance policy exclusions EXCEPT:

6-month legal action limit provision

Which of the following statements about agent/producer responsibilities is correct?

Agents must always act ethically and professionally in all dealings with policyowners and future policyowners.

All of the following statements about the regulation of the sale of variable products are correct, EXCEPT:

Agents who only sell variable life products and do not sell fixed life products are not required to hold a life insurance license.

All the following statements regarding life insurance cost comparison methods are correct EXCEPT:

All cost comparison methods recognize the role of the cash value in projecting future costs of coverage.

Which of the following employees of ABC Computers could NOT convert their group life coverage to an individual policy?

Bill, who is on long-term disability this month

Variable life and variable universal life insurance are similar in all of the following ways EXCEPT:

Both require fixed, set premiums.

Reggie owns a whole life policy in which his wife Mary is the primary beneficiary. The couple has no children in common, so the contingent beneficiary is Carl, Reggie's son from a previous marriage. Mary's Reggie and Mary are in a car accident in Under the policy's common disaster clause, to whom will the policy's death benefit be paid? which Reggie dies instantly and Mary survives for three daughter from a previous marriage, Sue, is not a beneficiary. days before dying from accident-related injuries.

Carl

All the following statements regarding annuities are correct EXCEPT

Deferred annuities are a suitable replacement for life insurance.

Gina owns a $200,000 five-year renewable term insurance policy and wants to renew the policy at the end of the term. In this case, all the following statements are correct, EXCEPT:

Gina must prove insurability before the insurer can renew the policy.

Which of the following is NOT a requirement to obtain a resident producer's license?

appointment by at least two insurers

An endowment policy matures (endows) when its cash value equals its face amount, which may be:

at almost any age

Robert is purchasing a life insurance policy in which he is the insured. If he wants to keep the policy proceeds out of his estate for tax purposes, all of the following arrangements would help him meet that goal EXCEPT

designate an irrevocable life insurance trust to be the owner and Robert's estate to be the policy beneficiary

In a third-party life insurance contract, the parties to the contract are the:

the owner, the insured, and the insurance company

of the contract and declines 1 percentage point each year. What would the surrender charge rate be for a Alice's deferred annuity imposes a declining surrender charge that begins at 7 percent during the first year full withdrawal in the third year of the same contract?

5 percent

How does a family income policy differ from a family maintenance policy?

A family income policy combines whole life insurance with decreasing term insurance, while a family maintehance policy combines whole life and level term insurance.

While indexed annuities are fairly complex products, the basic concept is best described as which one of the following?

Changes in the selected stock index are the basis for determining the current interest rate credited to the annuity.

All of the following stalements regarding a variable annuity's assumed interest rate (AIR) are correct, EXCEPT

If the actual return is greater than the AIR, payments will decrease.

If insurers do not allow minors to be beneficiaries of life insurance, what happens if no adults are available to receive death benefits?

Insurers require the court to appoint a legal guardian before paying benefits to a minor child.

What happens to a signed application after the applied-for policy is issued?

It becomes patrt of the contract between the insurer and the policyowner.

Which of the following best describes the premium tax insurance companies must pay when they receive premiums?

It is a state tax imposed by relatively few states.

When must insurable interest exist for a life insurance policy to be valid?

It is only necessary for insurable interest to exist at the time the applicant applies for a life insurance contract.

Jenny directed $2,500 of her premium deposit to an aggressive technology stock sub-account. At the time of her original deposit, the value of an accumulation unit in that sub-account was $25. Jenny bought 100 units. Two months later, the value of each of those units dropped to $15. What is Jenny's investment in the technology stock account now?

S1,500

Mary pays for her life insurance with an annual premium. However, she is thinking of switching to a monthly premium mode. Which of the following best describes the consequence if she changes her mode to a monthly premium?

Mary will end up paying more over time than if she continued paying annual premiums.

Alex sold an insurance policy before his license lapsed and earned a commission on the sale. Is he entitled to a commission if the policy is renewed?

Yes, because he was licensed when the policy was sold.

Sarah, age 40, has just bought a 20-pay whole life policy. Which of the following statements is correct when she turns 60?

Premiums will no longer be required, but her coverage will remain in effect for her entire life.

Sasha, Kendall, Adam, and Julio are licensed producers in Michigan. The Director would NOT be able to suspend or revoke which producer's license for engaging in the following acts?

Sasha, who sold insurance policies to family members and friends this year

following statements regarding perils and hazards are correct EXCEPT:

Smoking cigarettes is an example of a peril.

All the following are parties to an annuity contract EXCEPT:

The agent

What is the only restriction on naming an annuitant?

The annuitant must be a natural person.

All of the following statements about the interest rates on deferred annuities are correct EXCEPT:

The guaranteed minimum rate is usually 5 to 6 percent.

To be considered insurable, a risk (and the potential loss it represents) must meet which one of the following requirements?

The loss must be definable as to time, cause, and location.

Which of the following statements regarding life insurance policy cost comparison methods s correct?

There are two types, the traditional net cost method and the interest-adjusted net cost method, and the interest-adjusted net cost method is most commonly used today.

For annuities sold by life insurers, payment options can be separated into what two categories?

those with a life contingency and those without one

How do actuaries compensate for the cost of running the business when determining the gross premium charged to the policyowner?

They add an expense load, which includes a safety margin factor, to the net premium to produce the gross premium.

Kelly owns a deferred annuity. What options does she have for using the funds accumulating in her contract before the annuitization date?

They can be withdrawn, partially or in full, before the contract annuitizes.

All the following reasons that a business might buy life insurance represent a valid insurable interest, EXCEPT:

to provide insurance coverage for large-volume customers

All of the following statements about key person life insurance are correct, EXCEPT:

Upon the insured employee's death, the employee's surviving family receives the policy's death benefit.

Alex owns a home service" life insurance policy, which means he most likely pays his premiums in which of the following ways?

Weekly or monthly, often personally to the agent who comes to Alex's home

Which of the following is guaranteed under most variable annuity contracts?

a death benefit, if the owner or annuitant dies before the contract is annuitized

A person who commits insurance fraud can be punished by all of the following EXCEPT:

a fine equal to the compensation received for the illegal act

Which of the following annuities accepts periodic premiums of any amount (above a specified minimum) and on any frequency desired by the annuity owner?

flexible premium deferred annuity

Assets that support the contractual obligations of the insurer's fixed and guaranteed products are maintained in the company's:

general account

Which of the folowing distribute a sum of money regularly, starting very shortly after they are bought?

immediate annuities

Structured settlements most commonly use:

immediate fixed annuities

All the folowing are possible variations of a joint and survivor annuity settlement option EXCEPT:

joint and 200 percent survivor option

When does a fixed deferred annuity contract provide a death benefit?

only if the contract owner or annuitant dies during the accumulation period

Grace's annuity pays her an income for her lifetime, regardless of how long she lives. When she dies, no further payments are made to anyone. Which type of settlement options does she have?

straight, or pure, life income

Annuities offer all the following benefits EXCEPT

tax-free distributions upon the annuity owner's death or retirement

In choosing a qualified retirement plan funding instrument (e.g., a mutual fund, certificate of deposit, or deferred annuity), which of the following benefits or features is available only through an annuity?

the ability to convert accumulated savings into a guaranteed stream of income that cannot be outlived

What is the name of the period during which premium funds are paid into an annuity contract?

the accumulation period

Whether a variable annuity's monthly income rises, falls, or stays level depends largely on which of the following?

the assumed interest rate (AIR) selected by the contract owner

The insurance company function responsible for evaluating the insurable risks and assigning appropriate premium rates, is the:

underwriting division

A deferred annuity would be a suitable recommendation for all the following needs EXCEPT:

• Joe, age 23, wants to save money for a European vacation in five years.

Under the standard bring-back rule, assets transferred out of a decedent's estate will be valued in the estate if the transter occurred within how many years before death?

3 years

Michigan. He is charged with embezzlement in Insurance of this charge within how many days of the hearing? New York, and his first pretrial hearing is set for March Jeff is a licensed insurance producer in both New York and 1. He must notify the Michigan Director of

30 days

Which insurance company function calculates company mortality and morbidity rates as well as the dividends on participating life insurance policies?

actuarial division

Which of the following statements about utmost good faith in insurance contracts is correct?

Both the insured and insurer must act in utmost good faith.

Larry, Brian, Susan, and Jennifer just started working for AlIPro Insurance Company in South Carolina. Based on their job descriptions below, which of them is NOT acting as a producer?

Brian, who is a vice president in AlIPro's human resources department and does not receive commissions

Which of the following would be most appropriate for Haley, 55, if her primary objective is to ensure having an income she cannot outlive?

an annuity

All the following statements regarding apparent authority are correct EXCEPT:

The insurer is not liable for an agent's acts when he or she is acting under apparent authority.

Jerry names a trust as the beneficiary of his life insurance. When Jerry dies, how will this trust work?

The insurer pays the death benefit to the trustee who manages tik assets for the trust's beneficiaries, named by Jerry when the trust was formed.

If an applicant for life insurance unintentionally misstates her age on her life insurance application, what will the insurer do if this is discovered after the end of the contestability period?

The insurer will re-calculate the death benefit.

All the following statements regarding life insurance level premiums are correct EXCEPT:

The owner of a whole life policy may elect to let the insurer raise premiums over time, resulting in a lower initial premium than would be the case with a level premium policy.

Dan owns a fixed whole life insurance policy. What type of death benefit is Dan guaranteed?

The policy guarantees a fixed death benefit amount.

If a universal life insurance policyowner skips a couple monthly premium payments, what is most likely to occur assuming the policyowner wishes to keep the policy in force?

The policy will remain in force as long as the cash value covers the monthly deductions and charges.

All of the following statements about annuities are correct, EXCEPT:

The primary purpose of an annuity is to guarantee the accumulation of money over time.

A term life insurance policy in which the protection and premium amounts stay the same during the term period is known as:

a level term policy

All the following types of insurance involve a personal contract EXCEPT:

a life insurance policy

To reinstate a lapsed life insurance policy under the typical reinstatement provision, the policyowner must provide all of the following, EXCEPT:

a valid reason for the unpaid premiums

Which one of the following would a state NOT permit as a life insurance policy exclusion?

death resulting from a plane crash in which the insured was a fare-paying passenger

When first meeting prospective insurance applicants, a producer must give them a document that explains the general features, benefits, and conditions of the type of insurance being considered, which is called a

buyer's guide

When meeting with a prospect to discuss life insurance, Agent Tyler makes disparaging comments about the financial stability and reputation of a competitor to dissuade the prospect from purchasing its policies. Which unfair trade practice has Agent Tyler committed?

defamation

Jack bought a life insurance policy that will provide a lump-sum death benefit plus a ten-year stream of income should he die before a specified date, Five years after purchasing the policy, before the specified date, Jack died and the policy began paying a monthly benefit to his family for ten years. What type of policy did Jack buy?

ten-year family maintenance policy

George purchased an annuity that will provide his wife, Anna, with monthly income payments for as long as she lives. In this scenario, what is Anna called?

the annuitant

From an insurance perspective, the term "loss exposure" means:

the extent to which an insurer is subject to a possible loss

With respect to the field of insurance, who are the two parties bound by the law of agency?

the insurance company and the producer

Under group insurance coverage, one policy covers a number of people. Who owns these group polices?

the organization that represents the group and which sponsors the coverage

George purchased an annuity in which his wife will receive income for as long as she lives. In this scenario, what is George most correctly called?

the owner

A whole life insurance policy matures, or endows, when:

the policy's cash value equals its face amount

If a variable universal life policyowner chooses death benefit Option 3, what will the guaranteed minimum benefit equal?

the policy's net amount at risk plus the greater of total premiums paid or the policy's cash value

Who completes an attending physician's statement (APS)?

the proposed insured's doctor, who is familiar with how the medical condition is being treated

When paying death benefits, life insurance companies must consider all of the following, EXCEPT:

the relationship between the insured and beneficiary

Why would a large manufacturer choose to self-insure rather than buy an insurance policy from an insurance company?

to save insurance premiums by paying relatively minor losses out of company funds

When comparing her insurance company's policies to those of Zenith Insurance, Melanie makes a misleading statement to convince an insurance prospect to terminate a policy with Zenith and buy one from Melanie's company. What activity has Melanie engaged in?

twisting

Under a survivorship life insurance policy, when does the insurer pay the death benefit?

upon the death of the insured who dies second

A producer must be registered with the Financial Industry Regulatory Authority (FINRA) to sell which one of the following types of life insurance?

variable life insurance

All the following are standard types of term life insurance EXCEPT:

variable term insurance

James is a licensed producer who lives in Michigan. He moves to a new town in the state. When must he notify the Michigan Department of Insurance of his move?

within 30 days

The suicide exclusion provision of a typical life insurance policy excludes coverage if death is the result of suicide within:

• 2 years following policy issue