Guarantee Exam Questions

All of the following are true of annually renewable term insurance except a. the policy must be renewed no matter what happens to ones health b. proof of insurability must be provided at each renewal c. the premium increases each year d. the death benefit remains level

b. proof of insurability must be provided at each renewal

A whole life policy that will generate immediate cash value is a. limited-pay policy b. single premium policy c. continuous premium policy d. variable life policy

b. single premium policy

Which of the following statements is true regarding an agent report during the policy application process? a. it becomes part of the entire contract after the policy is issued b. it is a required element of the contract c. it provides the agent's personal observations concerning the proposed insured d. it is only used when the initial premium is not paid with the application

c. it provides the agent's personal observations concerning the proposed insured

Which type of insurance policies provides pure life insurance protection without a savings element? a. variable b. universal c. term d. permanent

c. term

Which dividends option will increase the death benefit? a. reduced paid-up b. paid up addition c. accumulation d. extended term

b. paid up addition

Insurers cannot transact business in this state without a a. letter of clearance b. certificate of authority c. brokers license d. certificate of insurance

b. certificate of authority

Which of the following is an example of a physical hazard? a. carelessness b. lying c. bankruptcy d. diabetes

d. diabetes

An insured's flexible premium is invested into a separate account. What type of insurance product did he purchase? a. variable life b. variable universal life c. universal life d. an annuity

c. universal life

A new homebuyer wants to purchase a life insurance policy that would protect his family against losing the home, should he die before the mortgage was paid. The most inexpensive type of policy that would accomplish this need would be a. level term b. decreasing term c. increasing term d. flexible term

b. decreasing term

With adjustable life, the owner can change all of the following except a. the length of time the coverage will last b. the insured c. the death benefit d. the premium

b. the insured

How many excess continuing education credit hours may a licensee carry forward from one licensing period to the next? a. none b. 6 c. 12 d. 24

d. 24

A life insurance policy qualifies a Modified Endowment Contract if the amount of premium paid exceeds the amount that would have provided paid-up insurance in how many years? a. 7 years b. the life of the policy c. 3 years d. 5 years

a. 7 years

Which method of dealing with risk is applied when insurance is purchased? a. reduction b. transfer c. sharing d. avoidance

b. transfer

In whole life insurance, when is the policy cash value scheduled to equal the face amount? a. at the insured's age 100 b. by the policy's 10th yr c. when the insured paid up all policy loans d. it depends on the type of whole life purchased

a. at the insured's age 100

Which type of authority is found in the agent's contract? a. express b. apparent c. authority d. assumed

a. express

The commissioner of insurance is appointed by which authority? a. governor b. insurance department board of electors c. the NAIC d. guaranty association

a. governor

Once an insurer receives a claim, within how many days must the insurer provide claim forms to the insured? a. 3 colander days b. 10 working days c. 15 working days d. 30 calendar days

b. 10 working days

What is the ta penalty for withdrawing money from an annuity prior to age 59 1/2? a. 1.5% b. 10% c. 12% d. 20%

b. 10%

The entire contract includes all of the following except a. any riders or amendments b. a buyer's guide c. the life insurance policy d. a copy of the application

b. a buyer's guide

Which of the following is not a personal use of life insurance? a. an individual buys insurance to fund a buy-sell agreement b. an individual buys insurance to provide future income to a surviving spouse c. an individual buys cash value insurance to fund his childrens college education d. an individual buys insurance to help the family payoff the mortgage in case of premature death

c. an individual buys cash value insurance to fund his childrens college education

Which of the following authorities determines whether a cease and desist order should be issued? a. federal insurance regulation board b. guaranty association c. commissioner d. NAIC

c. commissioner

A producers license must be renewed a. every year b. every 2 yrs c. every 3 yrs d. every 5 yrs

b. every 2 yrs

Which of the following is the primary source of information that an insurer uses to evaluate an insured's risk for life insurance? a. risk analysis b. the law of large numbers c. agent's report d. insurance application

d. insurance application

An individual has a $200,000 convertible term life insurance policy. If he chooses he can, a. purchases another term policy and increase his death benefit without proof of insurability b. convert to a whole life policy for the same face amount without proof of insurability c. convert to another term policy with a lower face amount without proof of insurability d. purchase an individual annuity for any face amount using the 1035 exchange privilege

b. convert to a whole life policy for the same face amount without proof of insurability

Which of the following best describes the difference between joint life and joint and survivor annuity payment options? a. joint and survivor pays out a smaller benefit b. in joint life option, the benefits stop after the first death c. joint life covers two or more annuitants d. joint and survivor is a life contingency option

b. in joint life option, the benefits stop after the first death

An insure 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, its in the amount of $250,530. Is any potion of the proceeds that the beneficiary receives taxable? a. no, the beneficiary is qualified for a "bereavement exclusion" if the beneficiary is a spouse b. yes, proceeds in excess of face amount are taxable as interest c. no, proceeds from a life insurance policy are not taxable d. yes, proceeds from a life insurance policy are taxable

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

If an insurance company issues a policy even though some questions on the application were unanswered, when can the insurer get the answers to those questions? a. within 30 days issuing the policy b. at any time within the incontestible period c. never, the insurer has waived its right to those answers by issuing the policy d. within 3 months of issuing the policy

c. never, the insurer has waived its right to those answers by issuing the policy

If an annuity has a guaranteed minimum interest rate, this means a. the interest rate will not fluctuate b. there is no interest rate c. the interest rate will never drop below the guaranteed minimum d. the interest rate will never raise above the guaranteed minimum

c. the interest rate will never drop below the guaranteed minimum

Which of the following would be required to become licensed as an insurance producer? a. agency supervisor whose actions do not include selling insurance b. a person whose activities are limited to insurance advertising c. an officer of an insurer who does not receive commissions d. a customer service representative who solicits no more than one policy a yr

d. a customer service representative who solicits no more than one policy a yr

If an insured dies, and it is discovered that the insured misstated his/her age or gender the life insurance company will a. pay the face amount specified at the time of policy issue b. deny all claims bc of the misrepresentation c, adjust the back premiums for the proper age or gender d. adjust the death benefit to what the premium would have purchased at the actual age or gender

d. adjust the death benefit to what the premium would have purchased at the actual age or gender

Which of the following is consideration on the part of the insurer? a. decreasing premium amounts b. paying the premium c. underwriting d. paying a claim

d. paying a claim

If the policy summary for a life insurance policy is not given when the application is taken, when must the policy summary be given to the Policyowner? a. when the policy is delivered b. within 15 days of the application date c. within 30 days of policy issue d. when the policy is issued

d. when the policy is issued

Which of the following would be true of both the fixed period and fixed amount settlement option? a. the amount of payments is based on the receipt's life expectancy b. the size of installments decreases after certain period of time c. both guarantee payments for the life of the beneficiary d. both guarantee that the principal and interest will be fully paid out

d. both guarantee that the principal and interest will be fully paid out

When comparing a joint life policy to 2 individual policies of the same amount on the same insureds, which condition is true? a. joint life has a premium that is identical to the sum of the 2 individual policies b. the joint life premium can only be paid monthly c. joint life has a higher premium than the total of the 2 individual policies d. joint life has a lower premium than the total of the 2 individual policies

d. joint life has a lower premium than the total of the 2 individual policies

What is the difference between a straight life policy and a 20-pay whole life policy? a. the benefit settlement option b. the face amount and cash value c. policy maturity date d. premium payment period

d. premium payment period

An individual purchases a life insurance policy and lists his parents as the beneficiaries. He is able to change beneficiaries at any time. What type of beneficiary designation does the policy have? a. contingent b. primary c. revocable d. irrevocable

c. revocable

Which of the following losses would likely be covered under the accidental death rider? a. suicide b. mountain-climbing accident c. death resulting from a long-term disability d. death caused by a head on collision

d. death caused by a head on collision

Your client wants to provide a retirement income for his elderly parents in case something happens to him. He wants to make sure that both beneficiaries are guaranteed an income for life. Which settlement option should this policy select? a. life income b. joint and survivor c. fixed-amount installments d. fixed-period installments

d. fixed-period installments

When the owner of a participating whole life insurance policy uses the dividend to provide more life insurance coverage, which of the following dividend options is being used? a. paid-up additions b. reduce the premium c. fixed amount d. reduced paid-up

a. paid-up additions

How are policy loans calculated? a. the face amount of the policy minus investments fees b. the policy's cash value minus unpaid loans and accrued interest c. the face amount of the policy minus unpaid loans d. premium contributions over the previous year minus unpaid loans

b. the policy's cash value minus unpaid loans and accrued interest

If a life insurance company uses HIV testing as a part of its underwriting, when must an applicant be notified of the procedure? a. prior to solicitation of the policy b. prior notice is not required c. prior performance of the test d. prior to ordering a physical examination

c. prior performance of the test

Which of the following is true regarding a joint life annuity a. the pmts go to a beneficiary upon the last death b. the payments go to the surviving annuitant after the first death c. the payments stop at the first death d. the payments stop at the last death

c. the payments stop at the first death

To be qualified as chronically ill, and individual should be unable to perform at least how many activities of daily living due to their condition? a. 2 b. 3 c. 4 d. 5

a. 2

Which of the following statements concerning the medical info bureau is correct? a. the MIB assists underwriters in evaluating and classifying risks b. the MIB report must be attached to each life insurance policy issued c. all applicants for life insurance receive a copy of the findings of the life insurance medical exam d. info contained in the medical info bureau report is available to all physicians

a. the MIB assists underwriters in evaluating and classifying risks

A licensee who has moved to PA from out of state must provide which of the following before becoming licensed as a resident in this state? a. a United States postal service change of address form b. proof of licensing or a letter of clearance from the previous home state c. a notarized copy of a PA drivers license d. a current utilities bill

b. proof of licensing or a letter of clearance from the previous home state

What does the term reciprocity mean? a. allowing producers transact insurance after their suspended license is reinstated b. allowing producers share commissions on related business c. waiving licensing requirements for nonresident applicants who are licensed in their home state, if the home state awards licenses to producers in this state on the same basis d. waiving continuing education requirements for one type of license if the requirements have been met for a different type of license

c. waiving licensing requirements for nonresident applicants who are licensed in their home state, if the home state awards licenses to producers in this state on the same basis

IF an applicant submits the initial premium with an application, which action constitutes acceptance? a. the applicant submits a statement of good health b. the producer delivers the policy c. the insurance company receives the application and initial premium d. the underwriters approve the application

d. the underwriters approve the application

In order to reinstate a life insurance policy the insured must do all of the following except a. repay any outstanding loans and interest b. pay next years premium in advance c. pay back premiums d. pay any interest due on back premiums

b. pay next years premium in advance

To purchase insurance, the Policyowner must face the possibility of losing money or something of value in the event of loss. What is this concept called? a. insurable interest b. indemnity c. exposure d. pure loss

a. insurable interest

In contrasting stock insurers with mutual insurers, which statement is true? a. stock insurers are owned by the shareholders and issue nonparticipating policies b. stock dividends are tax free while policy dividends are taxable c. nonparticipating policies can pay out dividends to the policyholders d. mutual insurers are owned by shareholders and issue participating policies

a. stock insurers are owned by the shareholders and issue nonparticipating policies

An insured purchases a nonparticipating whole life policy. This policy includes all of the following except a. cash values b. dividends c. a premium calculated closely to the cost of the insurance d. permanent protection

b. dividends

Which of the following indicates the person upon whose life the annuity income amount is determined? a. owner b. insured c. annuitant d. beneficiary

c. annuitant

Because of an injury, an insured has been unable to work for 7 months. When his life insurance premium came due, he was unable to pay, yet the policy remained in force. The policy includes a. waiver of premium rider b. guaranteed insurability benefits c. facility of payment claus d. nonforfeiture options

a. waiver of premium rider

Life insurance can provide which of the following? a. protection against outliving one's assets b. creation of a future liability c. liquidation of ones estate d. survivor protection

d. survivor protection

J is receiving fixed amount benefit payments from his late wife's insurance. He was told that if he dies before all of the benefits are paid, the remaining amount will go to the contingent beneficiary. Which settlement option did J choose? a. interest only b. joint and survivor c. fixed amount d. fixed period

c. fixed amount

What is the maximum civil penalty per violation of the regulations of the insurance code that define acts that are subject to fines, or license suspension or revocation? a. $500 b. $1,000 c. $5,000 d. $10,000

c. $5,000

The reduction of premium option uses the dividend to reduce a. the previous years premium b. the premium on any other policy owned by the policyowner c. next years premium d. this years premium

c. next years premium

Which risk classification is representative of the majority of people in a certain age group and with similar lifestyles? a. substandard b. declined c. preferred d. standard

d. standard

An adjustable life policy can assume the form of a. only term insurance b. only permanent insurance c. either term or permanent d. neither term insurance nor permanent

c. either term or permanent

A married couple purchases a life insurance policy on their newborn baby. They are concerned about what would happen to the policy if either one of them were unable to continue making payments due to death or disability. Which policy rider should their agent recommend? a. guaranteed insurability b. automatic premium loan c. waiver of premium d. payor benefit

d. payor benefit

Which of the following will not be included in the buyers guide? a. comparison of policy costs b. explanation on how to choose the amount and type of insurance c. basic info about life insurance policies d. specific info about the policy

d. specific info about the policy

If an agent follows the rules and terms of his agent contract, he is exercising his a. express authority b. apparent authority c. contractual authority d. implied authority

a. express authority

Which of the following policies can be described as a flexible premium adjustable life policy? a. term life b. credit life c. universal life d. whole life

c. universal life

In the event an annuitant dies during the accumulation period, and there is a beneficiary named in the annuity, annuity benefits would be paid to the a. named beneficiary b. annuitants estate c. next of kin d. insurance company

a. named beneficiary

Which of the following is true regarding thrift plans? a. the employer contributes up to 10% of each employee's salary b. the employer contributes a certain amount for each dollar contributed by the employee c. the employee is the sole contributor to the plan d. the employer is the sole contributor to the plan

b. the employer contributes a certain amount for each dollar contributed by the employee

According to the common disaster if the insured and primary beneficiary are killed in the same accident and it cannot be determined who died first, which of the following will be assumed? a. the insured died before the primary b. the primary beneficiary died before the insured c. the death occurred at the same time d. the estate of the primary beneficiary and the contingent beneficiary split the benefits equally

b. the primary beneficiary died before the insured

Which of the following could reduce the amount of the death benefit? a. making premium payments within the grace period b. choosing a paid-up addition dividend options c. failure to repay a policy loan d. adding a family term rider

c. failure to repay a policy loan

In a deferred annuity, the difference between the accumulation value and the surrender value is the a. mortality charge b. interest credit c. front end load d. surrender charge

d. surrender charge

All of the following statements are true regarding an ordinary (straight) life police except a. it is funded by a level premium b. it builds cash value c. if the insured lives to age 100, the policy matures, and the face amount is paid to the insured d. it does not have guaranteed death benefit

d. it does not have guaranteed death benefit

All of the following are true of group life insurance except a. when the insured terminates membership in the group life coverage can be converted to whole life b. the insureds each own their own contract c. evidence of insurability is usually not required d. premium rates are based upon the average age, gender and purpose of the group

b. the insureds each own their own contract

An insured and his spouse recently had a child. Which of the following riders would allow the couple to insure the child for a limited period of time at a specified amount? a. guaranteed insurability waiver b. spouse term rider c. childrens term rider d. payor rider

c. childrens term rider

An insurer must notify the consumer in writing that an investigative consumer report has been requested, within how many days of the initial request? a. 3 days b. 5 days c. 10 days d. 30 days

a. 3 days

What is the most common name for a single policy that is designed to insure two or more lives with a standard premium, and that pays the death benefit upon the first death? a. second to die b. last survivor c. survivorship life d. joint life

d. joint life

When an insured terminates membership in the insured group, the insured can convert to a. whole life without proof of insurability b. whole life with proof of insurability c. term without proof of insurability d. term with proof of insurability

a. whole life without proof of insurability

Among people in the same class and life expectancy, which of the following factors can be used to influence premium rates? a. race b. occupation c. ancestry b. marital status

b. occupation

When an agent delivered an insurance policy to the insured, he collected the initial premium, as well as a document verifying that the insured had not had any injuries or illness since the application date. What is this document called? a. insurance agreement b. insurability clause c. statement of good health d. statement of insurability

c. statement of good health

Can value guarantees in a whole life policy are called a. nonforfeiture values b. living benefits c. cash loans d. dividends

a. nonforfeiture values

Who would be allowed catch-up contributions? a. individuals who have dependents b. individuals age 50 or older c. anybody who has a traditional Roth IRA d. an IRA owner who contributes less than the allowed maximum amount

b. individuals age 50 or older

An equity indexed annuity will grow based on a. current interest rates b. a rate of interest determined by the banking system c. performance of a recognized index d. performance in a separate account

c. performance of a recognized index

Under what circumstances will the contingent beneficiary receive the death benefit? a. if the tertiary beneficiary dies before the insured b. if designated by the insured c. if designated by the primary beneficiary d. if the primary beneficiary dies before the insured

d. if the primary beneficiary dies before the insured

Which of the following is true regarding pure life annuity settlement options? a. it guarantees that all the proceeds will be paid out b. the beneficiary will receive a refund of the principal c. it guarantees income for a specified period of time d. it provides the highest monthly benefit

d. it provides the highest monthly benefit

In life insurance, which of the following is not required to have an insurable interest in the insured? a. the policyowner b. the insured c. the applicant d. the beneficiary

d. the beneficiary

A lender who conditions approval of a loan on the condition that the borrower purchase insurance from that lender may be guilty of a. unfair discrimination b. illegal inducement c. coercion d. misrepresentation

c. coercion

The frequency and the amount of the premium payment are known as what? a. level premium b. plan mode c. premium mode d. net premium

c. premium mode

Upon the surrender of a life insurance policy, any cash value accumulated in excess of the premium payments is a. taxed as income on 50% of the excess b. assessed a fine of 10% of the excess c. taxed as ordinary income d. not taxed

c. taxed as ordinary income

A loss resulting from which of the following would qualify for the accidental death rider coverage? a. a health condition b. a disability c. a hazardous hobby d. an automobile accident

d. an automobile accident

During policy solicitation, an insurer exaggerates the financial condition of one of its competitors. and makes it sounds worse than it is. This is an example of an unfair trade practice of a. defamation b. twisting c. false advertising d. misrepresentation

a. defamation

An annuitant pays the annuity premium on the 14th of each month. Which of the following best describes this arrangement? a. level b. flexible c. lump sum d. single

a. level

What is the purpose of the surrender charge in a deferred annuity? a. to compensate the company for loss of investment value b. to punish the annuitant for breach of contract c. to prevent the over funding of the annuity d. to provide additional revenue for the insurance company

a. to compensate the company for loss of investment value

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 a. $30,000 b. $70,000 c. $100,000 (combination of the cash value and premium paid d. A survivor benefit determined by the insurance company

b. $70,000

How does insurance distribute the financial consequences of individual losses? a. it transfers the risk to a small number of insured b. it transfers the risk to all persons insured c. it retains the financial consequences d. it transfers the risks to associates of insured

b. it transfers the risk to all persons insured

Variable life insurance is regulated by all of the following entities EXCEPT a. the finance regulatory authority b. the us department of treasure c. the securities exchange commissioner d. the department of insurance and/or financial services

b. the us department of treasure

A whole life policy is surrendered for a reduced paid-up policy. The cash value in the new policy will a. decrease over time b. reduce to the pre-surrender value c. continue to increase d. remain the same

c. continue to increase

An applicant for a disability insurance policy has a heart condition of which they are unaware and therefor they answer no to the question pertaining to heart problems on their application. Their answer is considered to be a a. concealment b. fraudulent anser c. representation d. warranty

c. representation

What is the cost of coverage based on for group live insurance? a. the ratio of men to women b. the insured individual ages c. the average age and the ratio of men/women d. the average age

c. the average age and the ratio of men/women

The guaranteed insurability rider allows the owner to purchase additional amounts of life insurance without proof of insurability at all of the following except a. marriage b. purchase a new home c. approximately every 3 years between the ages of 25 and 40 d. birth of a child

b. purchase a new home

The human life value approach to determine life insurance needs is based upon which of the following ideas? a. specific needs fir college tuition b. retirement needs c. loss of the breadwinner's income d. replacement of assets

c. loss of the breadwinner's income

Which of the following would to be eligible for coverage under key person? a. the pharmacist in a drug store b. the manager of a small store c. the owner of a shop d. the executive officer of a company

c. the owner of a shop

A person holds a temporary producer's license because he is the designee of a producer who has been called to active military duty. What is the maximum amount of time that the license will last? a. 360 days b. a period deemed to be necessary by the commissioner c. 150 days d. 180 days

d. 180 days

Which of the following is not a component of an insurance policy premium? a. investment return b. number of beneficiaries c. mortality cost d. insurer expenses

b. number of beneficiaries