Exam questions life insurance

Variable life insurance is regulated by all of the filing entities except

The US. Department of Treasury.

All of the following statements about index whole life insurance are true except.

The policy face amount remains level throughout the life of the policy

What is the major diffrence between stock and mutual companies

ownership

How will life insurance proceeds that are paid as a lump sum received by the beneficiary?

Free of federal income taxation

How long is the grace period for an individual life insurance policy?

1 month

which of the following documents used in the underwriting process contains specific medical details about an applicant

Attending physician's statement (aps)

If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered what type of insurer?

Authorized or admitted

Which of the following is required to provide a notice of information practices and applicants and policyholders?

The producer

Which of the following types of agents authority is also called ''perceived authority''

Apparent

If a loan request is for a payment of due premiums on the policy, how soon must the insured issue a loan

Immediately

Peril is most easily defined as

The cause of loss insured against

Who is the annuity owner?

The person who purchases the annuity

Which is true about the cash surrender nonforfeiture option?

funds exceeding the premium paid are taxable as ordinary income

When risks with higher probability of loss are seeking insurance more often than other risks, this is known as what?

Adverse Selection

Chris, who is unlicensed, works part-time in her father's insurance agency. She may perform all of the following activities EXCEPT

Collect Premium for in force policy and explain coverage to clients that have existing policies written by her father.

while completing a life insurance application the applicant realized that she should have answered earlier questions differently. What should the agent do to make the necessary change?

Cross out the incorrect information write the correct answer and have the applicant initial the change

An insurance company is domiciled in California transacts insurance in Nevada. what is this insurer's classification in Nevada ?

Foreign

Events or conditions that increase the chances of an insured loss occurring are referred to as

Hazards

All of the following are true regarding the Federal Fair Credit Reporting Act Except

Reports may be sent to anyone who requests one.

in case of a loss the indemnity provision in insurance policies

Restores an insured person to the same financial state as before the loss

When an agent delivered an insurance policy to the insured, he collects the initial premium as well as a document verifying that the insured had not had an injury illness since the application date. What is the document called?

Statement of good health.

The insurer organized to return a profit to the stockholders is what type of insurer?

Stock company

Life insurance creates an immediate estate. Which of the following best explains this statement?

The face value of the policy is payable to the beneficiary upon the death of the insured

The entire contracts includes all of the following except

a buyer's guide

What guarantees that the information explained in the insurance contract is true

a warranty

All of the following are general requirements of a qualified plan EXCEPTa)The plan must provide an offset for social security benefits.b)The plan must be communicated to all employees.c)The plan must be for the exclusive benefits of the employees and their beneficiaries.d)The plan must be permanent, written and legally binding.

a. The plan must provide an offset for social security benefits.

If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information EXCEPT the applicant'sa)Prior insurance.b)Ancestry.c)Credit history.d)Habits.

b. Ancestry.

An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement?a)$0b)$100,000c)$200,000d)$100,000 plus the total of paid premiums

c.200,000

Who can request changes in premium payments, face value, loans, and policy.

policyowner

Which term is used for insurance companies that have a certificate of authority to transact insurance.

Admitted

According to the Law of Agency, a principal is represented by whom?

Agent or producer

An adjustable life policy can assume the form of

Either term insurance or permanent insurance

Which type of authority is found in agents contract?

Express.

Which of the following amount could reduce that benefit?

Failure to repay a policy loan.

Who would be allowed catch-up contributions?

Individuals age 50 or older

In the agent/insurer relationship, who is considered the principal?

Insurer

In order to reinstate a life insurance policy that ensured must do all of the following execpt?

Pay next year's premium in advance.

How do premiums in variable universal Life policy vary from those in variable whole life policy

Premiums are flexible

A situation in which a person can only experience a loss and no gain presents what type of risk?

Pure Risk

A whole life policy that will generate immediate cash value is?

Single premium policy

Which of the following is a Permissible reason for an insurance company to contest payment of a claim based on statements in the application

The application contains materials misstatements

What is the cost of coverage based on for group of life insurance?

The average age in the ratio of men to women.

If an annuity has a guaranteed minimum interest rate, this means

The interest rate will never drop below the guaranteed minimum

Which of the following is an example of a producer's fiduciary duty?

The trust that a client places in the producer in regard to handling premium

Mortality - Interest + Expense =a)Operating expensesb)Net premiumc)Gross premiumd)Benefits budget

c.gross premium

What type of risk is insurable?

pure

Who owns stock companies?

stockholders

which of the following best describes the concept that the insured pays a small amount of premium of the insurance company

Aleatory

What is a warranty in an insurance contract?

An absolute true statement upon which the validity of the insurance contract is based

What document is required for an insurance company to transact insurance?

Certificate of Authority

In insured in his spouse, recently had a child. Which of the following rider Would allow the couple to insure the child for a limited period of time at a specific amount.

Children's term rider

A person who fails to separate premium monies from his own personal funds is guilty of

Commingling

When a change needs to be made on an application for insurance, which is the best method for correcting the information?

Complete a new application or ask the applicant to initial the correction on the original application.

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?

Consideration

Which of the following is a correct statement about annuities

Fixed annuities do not provide protection against inflation.

The human life value approach to determining life insurance needs is based upon which of the following ideas?

Loss of the breadwinner's income

Which of the following actions does NOT constitute false advertising?

Stating the dividends are not guaranteed

What are the three types of agent authority ?

express, implied, apparent

If a soliciting producer suspects that there could be misrepresentation on the part of the applicant for insurance, what must the producer do?

Inform the insurance company

What two elements are necessary for a life insurance contract to have a legal purpose?

Insurable interest & consent

What do individuals use to transfer their risk of loss to a larger group?

Insurance

Which dividend option will increase the death benefit?

Paid up additions.

A participating insurance policy may do which of the following?

Pay dividends to policy owner

What is the term for the causes of loss insured against in an insurance policy?

Peril

What are three types of hazards?

Physical, Moral, Morale

If a life insurance company uses HIV testing as part of its underwriting, which must an applicant be notified of the procedure,

Prior to performance of the test.

All of the following are true of annually, renewable terms, insurance Except

Proof of insurability must be provided at each renewal

all of the following are true about key person insurance Except

The death benefit is taxable to the business

With Adjustable Life, the owner can change all of the following EXCEPT

The insured

Insurers are classified according to their domicile. What are the three types of insurers?

Domestic,Foreign,Alien

In insurance, when is the offer usually made on a contract?

When the insurance application is submitted

When does an insurance policy go into effect?

When the policy is delivered and the premium is paid

What are the four elements of an insurance contract?

Agreement(offer and acceptance) consideration competent parties, and legal purpose

What type of insurer is a formed under the law of another country

Alien

An insured receives an annual life insurance dividend check. What term best describes this arrangement?a)Accumulation at Interestb)Cash optionc)Reduction of Premiumd)Annual Dividend Provision

Cash option

Conditions that increase the chances of a loss are known as what?

Hazards

What entities make up the Medical Information Bureau?

Insurers

An applicant conceals relevant health information on the application. The applicant presents what type of hazard?

Moral

Wagering on a sporting event is known as what type of risk?

Speculative

Whose responsibility is it to determine that all the questions on an insurance application are answered?

The agent's

An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT?a)The premium for individual coverage will be based upon the insured's attained age.b)The insured may choose to convert to term or permanent individual coverage.c)The insured would not need to prove insurability for a conversion policy.d)The insured may convert coverage to an individual policy within 31 days.

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

which of the following is required in order for a plan to be qualified?

The plan must be formally written and communicated to the employee

When would a misrepresentation on an insurance application be considered fraud?

When its intentional and material

#7. An insured has a life insurance policy in the amount of $250,000 naming his wife as beneficiary. Upon his death, his beneficiary decides not to receive the death benefit for some time. When she finally receives the death benefit check, it's in the amount of $250,530. Is any portion of the proceeds that the beneficiary receives taxable?

Yes, proceeds in excess of face amount are taxable as interest.

When a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income? a)Neither principal nor interestb)Principal onlyc)Interest onlyd)Both principal and interest

c. Interest only

A man taking care of his wife's insurance agency while she is in active duty in the military has had a temporary license for 100 days . How many more days can pass before the license expire

80 days

Which provision may be added to a permanent life policy, at no cost, that insures that the policy will not lapse so long as there is cash value?

Automatic premium loan option

If the owner of an IRE dies without having named a beneficiary, by what point must the interest be distributed?

December 31 of the calendar year that contains the 5th anniversary of the owner's death.

When a whole life policy is surrendered for is nonforfeiture value, what is the automatic option

Extended term

Under which of the following conditions would life insurance proceed be taxable by the federal government?

If there is a transfer for value.

Which of the following is best described life annualties with certain options?

It guarantees benefit payments for life of the annuitant and for a specified period for the beneficiary

Which of the following is true regarding a joint annuity?

The payments stops at the first death

What is the waiting period on a Waiver of Premium rider in life insurance policies?a)30 daysb)3 monthsc)5 monthsd)6 months

d. 6 months

what is the tax penalty for withdrawing money from an annuity prior to age 59 1/2 ?

10%

An annuity has accumulated the cash value of $70,000, of which $30,000 is from premium payments. The annuitant dies during the accumulation phase. The beneficiary will receive

70,000

Which of the following writers pay a beneficiary a debt benefit that is double or triple the face amount if the insured that was caused by an accident, as defined in the policy?

An accidental death rider

Insurance is a contract that protects the insured from what?

Loss

a persons who does not lock the door to their home shows an indifferent attitude. This person presents what type of hazards?

Morale

cash value guarantees in a whole life policy are called

Nonforfeiture values

which of the following is not a component of an insurance policy preminum?

Number of beneficiaries

Amonf the applicants in the same class and life expectancy which of the following factors can be to influence the premium rates?

Occupation

Because of an injury, an insured has been unable to work for 9 months. He paid The policy premium for his life insurance for the first six months of. But did not have to pay anything for the remaining three, yet the policy remain enforced. The policy includes.

Waiver of premium rider

Key person insurance can provide protection for all of the economic losses to a business except

pay the death benefit to the estate of the insured

In insurance an offer is usually made when

An applicant submits an application to the insurer

In insurance, an offer is usually made when

An applicant submits an application to the insurer

When agents act within the scope of their contract, their actions will be assumed to be the acts of whom?

Insurer

What does the Guaranty Association guard against?

Insurer insolvency

an insurance policy paid a nontaxable dividend to the insured one year and nothing the next. From what type of insurer did the insured purchase the policy?

Mutual

The reduction of premium option uses dividend to reduce.

Next year's premium

Which of the following best describes annually renewable term insurance?a)It is level term insurance.b)It requires proof of insurability at each renewal.c)Neither the premium nor the death benefit is affected by the insured's age.d)It provides an annually increasing death benefit.

a. level term insurance

Which of the following is NOT considered a misrepresentation as it pertains to unfair trade practices?a)Exaggerating the benefits provided in the policyb)Stating that the competitors will arbitrarily increase their premiums each yearc)Making comparisons between different policiesd)Stating that the insurance policy is a share of stock

c. Making comparisons between different policies

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?a)$0b)$200c)$9,800d)$10,000

c.9,800

The death protection component of Universal Life Insurance is alwaysa)Whole Lifeb)Adjustable Lifec)Decreasing Termd)Annually Renewable Term

d. annually renewable term

According to the entire contract provision, what document must be made part of the insurance policy?a)Buyer's Guideb)Agent's reportc)Outline of coveraged)Copy of the original application

d. copy of the original application

all of the following are ways to handle risk except

elimination

Restoring an insured financially after a claim is known as

indemnity

Whom does an insurance agent represent?

insurance company

A policy owner who cannot borrow the equity change beneficiaries assigned a policy or stop paying premiums without the beneficiaries written consent has designated the beneficiary as an

irrevocable beneficiary

An individual tendency to be dishonest would be indicative of a

moral hazard

In order to get a non resident license in Louisiana producer

Apply and pay a fee to a nonresident state that reciprocates.

When agents ,brokers ,or solicitors handle premiums for an insurer they are acting in which capacity?

As a fiduciary

Which of the following policies can be described as flexible premium adjustable life policy?

Universal life

Which of the following best describes the concept that the insured pas a small amount of premium for a large amou part of the insurance company?

Aleatory

The requirement that agents must account for and promptly remit all insurance funds collected is known as what type of agent responsibility?

Fiduciary

The type of insurance company organized to return any surplus money to its policyholders is known as what ?

Mutual company

The reduction, decrease, or disappearance of value of the person or property insured in a policy is known as what?

Loss

What are the five characteristics of an ideally insurable risk

Loss must be *due to chance *statistically predictable *definite and measurable *not catastrophic *coverage cannot be mandatory

Which annuity purchased with a single payment and begins annuity payments within the first year.

SPIA (SINGLE PREMUIEM IMMEDIATE ANNUITY)

which of the following is NOT a goal of risk retention?

To minimize the insured's level of liability in the event of loss

Is a producer allows his license to lapse within the time. May the producer reinstate the same license?

2 years

Which of the following is the least amount of control business that would be considered illegal?

26%

If a license changes, he's or her residence address within how many days must the director be notified.

30 days

Insurers must keep files of all advertisement used in Louisiana for?

4 years

When comparing a joint life policy to two individual life policies of the same amount on the same insured, which conditions is true?

Join life has low premiums than the total of the two individual policies.

Your client wants to provide A retirement welcome income for his elderly parents in case something happens to him he wants to make sure that both beneficiaries are guaranteed and income for life. Which settlement option should this policyowner select?

Joint and survivor

What are the strategies used by underwriter to prevent adverse selection?

Restriction of coverage, refusal to accept a risk, and accepting a risk at higher rate

What is the best way to handle incomplete insurance applications?

Return the application tom the applicant for completion

which of the following is an example of a producers fiduciary duty ?

The trust that a client places in the producer in regard to handling premium

Which of the following is an example of producer's fiduciary duty

The trust that client places in the producer in regard to handling premiums

which of the following is NOT a goal of risk retention?

To minimize the insured level of liability in the event of loss

For the purpose of insurance, what is risk?

Uncertainty of loss

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

When the insurer approves a prepaid application

Which of the following statements described one of the reasons individual purchase life insurance?

it creates an immediate estate.

What is the most common name for a single policy that? Is designed to ensure two are more lives with a standard premium, and that pays the debt benefit upon the first death

joint life

If an agent fails to obtain the applicant's signature on the insurance application, what must the insurer do?

Send the application back to the applicant for signature

If an applicant does not receive his or her insurance policy, who would be held responsible?

The agent

when an insured terminates membership in the insured groups, the insured can convert

Whole life without proof of insurability.

An insurer wants to obtain information from investigators regarding an applicant for insurance. What must the insurer do in order to legally acquire this information?a)Receive written permission from the Department of Insuranceb)Receive a signed statement from the insured which authorizes the investigationc)Sign a waiver that the information will be kept confidentiald)Present the insured with a Disclosure Authorization Notice

d. Present the insured with a Disclosure Authorization Notice

The type of insurance sold to a debtor and designed to pay the amount due on a loan if the debtor dies before the loan is repaid is calleda)Credit health.b)Decreasing whole life.c)Multiple Protection insurance.d)Credit life.

d. credit life