INS. LIFE SECTION 1 & 2

23. The effective date for accelerated benefits resulting from illness shall be when? A. After 30 day waiting period B. After 90 days waiting period C. After 6 month probationary period D. Policy effective date

A. After 30 day waiting period

9. Records related to replacement transactions must be kept on file for a period of how many years? A. Three years B. Five years C. Two years D. Ten years

A. Three years

Which of the following policies provides the greatest amount of protection for an insured's premium dollar as well as some cash accumulation? A. Whole Life B. Limited-Pay Life C. Annuity D. Term

A. Whole Life EXPLANATION: IF this question had not mentioned cash accumulation the answer would have been term

2. All of the following are considered advertising EXCEPT: A. Printed material used in direct mail B. Newspapers C. A letter to one client D. Television script

C. A letter to one client

28. Items required to be on the basic illustration include all of the following EXCEPT: A. Date the illustration was prepared B. Guaranteed death benefit C. Age, name and gender of the producer D. Name of insurer

C. Age, name and gender of the producer

20. Which one of the following is not a medical condition that would qualify for accelerated benefits? A. Coronary artery surgery B. Alzheimer's disease C. Paraplegia D. Asthma

D. Asthma

3. All of the following words are prohibited from use in advertisements EXCEPT: A. Insurance B. Investment plan C. Profit sharing D. Savings plan

A. Insurance

12. The Buyer's Guide is required to be given out when? A. At policy delivery B. At time of application C. Before accepting the client's initial premium D. Policy delivery

C. Before accepting the client's initial premium

16. When must solicitors of insurance disclose themselves as such to clients? A. Never B. At the end of the sales presentation C. Before beginning any sales presentation D. At policy delivery

C. Before beginning any sales presentation

1/2/2 To add coverage for a child to your Whole Life policy you would purchase which of these riders? A. Child Term Rider B. Payor Benefit Rider C. Waiver of Premium Rider D. Guaranteed Insurability Rider

A. Child Term Rider EXPLANATION: A Child Term Rider is the rider you would purchase to add Term coverage for a child to your existing Whole Life policy.

Which of the following is true about the insuring clause? A. It contains the insurer's enforceable promise to pay covered claims B. It states that the insurer may contest a claim for material misrepresentation C. It requires that the application be attached to the policy D. It states the policy owner's rights

A. It contains the insurer's enforceable promise to pay covered claims EXPLANATION: The insuring clause states that coverage is provided in accordance with the terms of the policy. It includes the insurer's promise to pay covered claims and is located on the first page of the policy.

Grandma owns a policy on her grandchild. Which rider would kick in if Grandma should die tomorrow? A. Payor Benefit Rider B. Child Term Rider C. Guaranteed Insurability Rider D. Waiver of Premium Rider

A. Payor Benefit Rider EXPLANATION: By adding the Payor Benefit Rider on a policy Grandma owns that covers the life of the child, the premium will be waived in the event of Grandma's death or total disability, keeping the grandchild's policy in force, until the grandchild reaches the age of majority. At the age of majority the policy becomes the responsibility of the grandchild.

If a client wants cash value life ins. with a flexible premium and an adjustable death benefit that will allow the policy owner a choice of various cash value investment options, he should buy: A. Variable/Universal Life B. Adjustable Life C. Variable Life D. Universal Life

A. Variable/Universal Life EXPLANATION: Variable life has a fixed premium and a min. guaranteed death benefit, but since it allows customers to self direct their cash value into several non-guaranteed sub-accounts, it is considered to be a securities product which requires the producer to have both a state life insurance license and a federal securities license Although universal life (also known as interest-sensitive whole life) is not considered to be a security, it does offer current rates of return, flexible premiums and adjustable death benefits. If you combine both products you have variable / universal life the best of both worlds

Life insurance becomes effective when: A. When the conditions in the conditional receipt are satisfied B. The applicant writes the check and receives a conditional receipt C. When the producer signs the application D. When the insurer receives the application at their home office

A. When the conditions in the conditional receipt are satisfied Explanation: One of the conditions in a conditional receipt requires that the applicant pay the initial premium before coverage can start. However, there may be other conditions specified in the conditional receipt, such as passing a physical exam

22. The effective date for accelerated benefits resulting from accidents shall be when? A. After 30 day waiting period B. After 90 days waiting period C. After 6 month probationary period D. Policy effective date

B. After 90 days waiting period

31. All of the following would be valid reasons for denial, revocation or suspension of a Viatical Settlement Provider's license EXCEPT: A. Any misrepresentation B. Paying to the insured less than the policy face amount as a settlement C. Engaging in fraudulent or deceptive practices D. Engaging in a pattern of unreasonable or untimely payments

B. Paying to the insured less than the policy face amount as a settlement

Which of the following types of insurance policies would provide the greatest amount of protection for a temporary period during which an insured will have limited financial resources? A. Limited Pay policy B. Term C. Whole Life D. Annuity

B. Term

1/7 If a client wants cash value life insurance with a flexible premium and an adjustable death benefit that will allow the policy owner a choice of various cash value investment options, he should buy: A. Universal Life B. Variable/Universal Life

B. Variable/Universal Life EXPLANATION: Variable Life has a fixed premium and a minimum guaranteed death benefit, but since it allows customers to self-direct their cash value into several non-guaranteed sub-accounts, it is considered to be a securities product which requires the producer to have both a state life insurance license and a federal securities license. Although Universal Life (also known as 'Interest-Sensitive' Whole Life) is not considered to be a security, it does offer 'current' rates of return, flexible premiums and adjustable death benefits. If you combine the two products, you have Variable/Universal Life, which offers the best features of both contracts.

Sandra Timms, age 27, is advised by her producer to purchase Life insurance to cover a 20-year-amortized $50,000 business-improvement loan. Which of the following plans would adequately protect Ms. Timms at the minimum premium outlay? A. A $50,000 Whole Life policy B. A $50,000 Level Term policy for 20 years C. A $50,000 Decreasing Term policy for 20 years D. A $50,000 20 Pay Life policy

C. A $50,000 Decreasing Term policy for 20 years

Which of the following is anti-forfeiture option that provides continuing cash value buildup? A. Extended term B. Cash Surrender C. Reduced paid-up D. Differed annuity

C. Reduced paid-up EXPLANATION: There are only 3 Non-forfeiture options; Cash Surrender, reduced paid-up, and the automatic option, extended term. Their purposes is to protect the insured accumulated cash value in case the whole life policy lapses. A client has 60 days from the policies premium due date to select the option she prefers. If none is selected, the company will give the client an automatic option, extended term.

All of the following are a part of a Life insurance policy, EXCEPT the: A. Incontestability Clause B. Insuring Clause C. Copy of the application D. Conditional Receipt

D. Conditional Receipt Explanation: Under the Entire Contract provision, a copy of the insured's application for Life insurance is attached to the policy. If it weren't, any false answers (misrepresentations) by the insured would not be admissible in court, since they would not be part of the entire contract. However, the Conditional Receipt is NOT part of a Life insurance policy. It is part of the application, and is torn off and given to the applicant when he pays his initial premium at the time of application.

1. Which of the following is correct regarding advertisements? A. Advertisements may be misleading B. Advertisements must be fair and not misleading C. The word investment is allowed in advertisements D. The word profits is allowed in advertisements

b. Advertisements must be fair and not misleading

1/23 John Livingston owns a 30-Pay Life policy that he purchased at the age of 30. The cash value will equal the face amount of the policy when he reaches the age of: A. 70 B. 100 C. 30 D. 60

B. 100 Explanation: Limited Pay Life insurance policies such as Life Paid Up at 65 or 20-Pay Life are simply variations of Whole Life policies. The cash value will equal face amount of the policy (at least) at the maturity of the policy, which is always age 100 on Whole Life policies. These limited-pay policies are designed so that the insured may pay his or her premiums faster and be "paid up" at a certain age. However, just because the premiums are paid up doesn't mean the policy has matured.

1/2 Which of the following is NOT correct regarding Ordinary Whole Life policies? A. The premiums payments are owed annually until you die or reach age 100 B. The cash value grows more quickly in the beginning years of the policy C. The coverage lasts for your whole life. D. Ordinary Whole life is a type of permanent insurance

B. The cash value grows more quickly in the beginning years of the policy EXPLANATION: An ordinary Whole Life policy (also known as Straight Whole Life) is a type of permanent insurance. Coverage last until you die, or until you reach age 100. Premiums are owed annually. A Limited Pay Whole Life policy would have the cash value grow more quickly in the beginning years of the policy.

1/3/4 In the formation of a Life insurance contract, the special significance of a Conditional Receipt is that it: A. Guarantees the applicant that a policy will be issued in the amount applied for in the application B. Is given by the producer only to applicants who fully prepay all scheduled premiums in advance of policy issue C. Serves as proof that the producer has determined the applicant to be fully insurable for coverage by the insurance company D. Is intended to provide coverage on a date earlier than the date of the issuance of the policy

D. Is intended to provide coverage on a date earlier than the date of the issuance of the policy Explanation: The Conditional Receipt is just that, conditional. This means that coverage is conditional upon the applicant meeting all of the underwriting requirements of the company and paying the premium. If the applicant does meet all the conditions, then it is possible that coverage could begin as early as the date of application.

The contingent beneficiary will receive policy proceeds when: A. The primary beneficiary pre-deceases the insured B. The insured pre-deceases all designated beneficiaries C. The insured pre-deceases the primary beneficiary D. No beneficiary has been designated

A. The primary beneficiary pre-deceases the insured

A 45-year old customer who is seeking to supplement his retirement income at age 65 would not buy a: A. Deferred Annuity B. Immediate Annuity

B. Immediate Annuity EXPLANATION: An immediate annuity has no accumulation period. For example, if Aunt Mary died and left you 1 million dollars, you could buy an immediate annuity and start to receive monthly payments right away for as long as you may live. On a deferred annuity, you would pay money in now, but take it out later, perhaps at retirement. Immediate annuities are often used to fund state lottery payouts.

26. All of the following are true about the illustration regulations EXCEPT: A. A copy of the illustration must be left with the applicant and also attached to the application B. The illustration must be the same as the death benefit applied for C. The illustration must be signed by the applicant and the producer no later than policy delivery D. Records related to illustration selling must be kept on file for 3 years from the date of issuance

D. Records related to illustration selling must be kept on file for 3 years from the date of issuance

Client applies for Life Ins. on 10/01. The app was approved and the policy was issued on 10/10. It was delivered to the customer on 10/18. When did the free look start. A. 10/01 B. 10/10 C. 10/18 D. 10/31

The free look starts at the time of policy delivery. During the free look, the policy owner may return the policy for any reason and receive a full refund. Of course once the policy is returned no coverage will apply.

8. Replacement rules would apply when replacing all of the following policies EXCEPT: A. Nonconvertible term that expires in five years or less and cannot be renewed B. Whole life C. Endowment D. 20 year level term

A. Nonconvertible term that expires in five years or less and cannot be renewed

13. What is the purpose of the Buyer's Guide? A. To discourage the applicant from buying insurance B. The explain the basics of the three types of life ins. whole life, endowment and term C. To encourage replacement D. To confuse clients

B. The explain the basics of the three types of life ins. whole life, endowment and term

All of the following are considered to be owner's rights under a Life insurance policy, EXCEPT: A. Taking a policy loan B. Selecting a settlement option prior to death C. Changing a dividend option D. Changing an irrevocable beneficiary

D. Changing an irrevocable beneficiary

25. All of the following policies are exempt from the illustration regulations EXCEPT: A. Variable life B. Group annuities C. Credit life D. Individual life insurance policies with more than a $10,000 guaranteed death benefit

D. Individual life insurance policies with more than a $10,000 guaranteed death benefit

17. All of the following terms are prohibited EXCEPT: A. Financial planner B. Investment advisor C. Financial consultant D. Insurance producer

D. Insurance producer

1/2/10 The life Ins. rider that will pay the Insured's premium after a period of disability due to accident or sickness is A. Wavier of premium B. Automatic premium loan C. Guaranteed insurablity D. Accidental death and dismemberment

A. Wavier of premium EXPLANATION: Wavier of premium is a type of health (also know as disability) insurance that may be added to a life policy for an additional premium. If the policy owner becomes totally disabled for a period of a last 6 months, the insurer will waive future premiums due until the policy owner recovers

When giving a client a conditional receipt, which of the following is true? A. In order for coverage to begin the applicant must pay all premiums B. Coverage begins as of date of application C. You never collect a premium until you deliver the policy D. The coverage will begin at earliest as of the date of application or when the client passes a physical, whichever is later

A. In order for coverage to begin the applicant must pay all premiums Explanation: When you give out a conditional receipt you are only giving it out because you have collected the client's first premium payment and the application. The client that receives a conditional receipt is now conditionally covered. There may be no conditions to complete, in which case coverage is effective as of date of application. If there are conditions to satisfy, then coverage is effective when the conditions are satisfied. The most common condition is that the client must pass a physical. When you give out a conditional receipt, coverage will be effective as of date of application or when the client passes the physical exam (if one is required), whichever is later.

An insurable interest must exist when: A. Policy ownership is transferred B. Death benefits become payable C. A Life insurance policy is cancelled D. At all times

A. Policy ownership is transferred Explanation: You can assign (or transfer) your Life insurance policy to anyone you want, as long as that person has an insurable interest in you. For example, if you have a terminal illness, you can sell your policy to an investor for cash (known as a 'viatical settlement'). You would then assign the ownership of your policy to the investor, who would now have an economic insurable interest in you. As the new owner of your policy, the investor would then name themselves as beneficiary, so when you die, the proceeds would go to them.

Which of the following statements about a typical Suicide clause in a Life insurance policy is true? A. Suicide is excluded for a specific period of years and covered thereafter B. Suicide is covered as long as the policy is in force C. Suicide is excluded as long as the policy is in force D. Suicide is covered for a specific period of years and excluded thereafter

A. Suicide is excluded for a specific period of years and covered thereafter EXPLANATION: The Suicide Clause, which is completely separate from the Incontestability Clause, excludes coverage for death resulting from suicide during the suicide exclusion (this time period varies by state, typically it is one to two years). After that, suicide is covered. If the insured dies by suicide during the suicide exclusion, there is no coverage, but the insurance company will refund the premiums paid in to date to the beneficiary, less any loans outstanding.

Sandra Timms, age 27, is advised by her producer to purchase Life insurance to cover a 20-year-amortized $50,000 business-improvement loan. Which of the following plans would adequately protect Ms. Timms at the minimum premium outlay? A. A $50,000 20 Pay Life policy B. A $50,000 Decreasing Term policy for 20 years C. A $50,000 Whole Life policy D. A $50,000 Level Term policy for 20 years

B. A $50,000 Decreasing Term policy for 20 years

Margaret May wants to name her husband as the beneficiary of her Life policy; however, she wishes to retain all of the rights of ownership. Mrs. May should name her husband as: A. Revocable beneficiary B. Irrevocable beneficiary C. Secondary beneficiary D. Tertiary beneficiary

A. Revocable beneficiary EXPLANATION: Most people are both the insured and the owners of their own Life insurance policies. As such, they may designate any beneficiaries they desire and they may change their designation any time they so choose, since their choice is revocable at their option. However, anyone may appoint an Irrevocable Beneficiary if they so desire. This designation, once chosen, may never be changed by the insured without the consent of the irrevocable beneficiary. Policy loans may not be taken without that person's consent either. Irrevocable designations are rare, but are sometimes used for business purposes, in divorce settlements, or for children.

27. Records related to illustration selling must be kept for how long? A. 3 years from the date of sale B. Until 3 years after the policy is no longer in force C. 5 years from the date of sale D. Records are not required

B. Until 3 years after the policy is no longer in force

A life insurance policy that combines term insurance protection, a flexible premium, and cash value accumulation is: A. Universal Life B. Increasing Term Life C. Variable/Universal Life D. Variable Life

A. Universal Life

You have a client that is a real estate agent. Which of the following types of permanent protection is best for this type of client? A. Survivor-ship life B. Variable life C. Adjustable life D. Universal life

C. Adjustable life

4. All of the following are allowable EXCEPT: A. Dividends may be projected, but not guaranteed B. Testimonials must be fair and accurate C. Advertisements can imply that the insurance company is endorsed by the state D. The name of the insurer must appear on the advertisement

C. Advertisements can imply that the insurance company is endorsed by the state

1/2/27 A client buys a $50,000 Whole Life policy on himself and wants to add $25,000 in Term coverage for his spouse. He should add which of the following riders to his policy? A. Additional Insured Rider B. Spousal Rider C. Other Insured Rider D. Family Rider

C. Other Insured Rider EXPLANATION: The Other Insured Rider may be added to your Whole Life insurance policy at any time in order to provide Term Life coverage for a relative, such as a new spouse or child. Of course, the 'other' person would have to pass a physical exam and your premium would increase. This rider is often used to provide family coverage.

30. The requirements to hold a license as a Viatical Settlement Provider include all of the following EXCEPT: A. Fill out an application & pay an app fee of $3,000 B. Renewal lisc. annually with a renewal fee of $1,500 C. Intend to act in good faith D. Poor business reputation

D. Poor business reputation

1/2/23 Which of these is a rider that would ensure you can purchase additional insurance coverage, at specified ages, regardless of health? A. Child term rider B. Guaranteed insurabilitiy rider C. Payor benefit rider D. Waiver of Preimum rider

B. Guaranteed insurabilitiy rider When you add the guaranteed insurablity rider to a life Ins Policy you have specific dates where you can increase you coverage regardless of health, based upon your current age.

14. All of the following are correct regarding the Policy Summary EXCEPT: A. It must be given to applicant at policy delivery or prior B. It explains the maximum amount the insurer can charge on a policy loan against cash value C. It is allowed to be included in the Buyer's Guide D. It must include the generic name for the policy

C. It is allowed to be included in the Buyer's Guide

1/2/7 A client buys a life insurance policy on July 1st. and dies by suicide 6 months later. The insurance company will: A. Pay the claim in full B. Deny the claim C. Pay half of the claim D. Deny the claim, but refund the premium

D. Deny the claim, but refund the premium EXPLANATION: All life ins. policies will contain a suicide exclusion. This is done to prevent adverse selection. How long the suicide exclusion lasts for varies by state. It is generally one or two years. If an insured should commit suicide before the suicide clause has passed by, the insurer will refund the premiums paid to the beneficiary. After the suicide clause has passed by suicide is covered.

1/3/3 Which of the following is true when the insurer issues a 'rated' policy: A. It is considered to be a counteroffer B. No additional premiums will be due C. It is considered to be acceptance of the risk D. Coverage is effective immediately

A. It is considered to be a counteroffer Explanation: Normally, it is the applicant who makes the offer to buy and it is the underwriter who accepts the risk when they issue the policy. However, when the underwriter makes a counteroffer, it is now up to the applicant to either accept it or reject it. Underwriters make counteroffers either in the form of 'rated' policies or by issuing a policy with an exclusion attached, such as for dangerous hobbies, occupations or health conditions.

10. When must the producer deliver the Important Notice Regarding Replacement of Life Insurance? A. No later than the time of application B. Policy delivery C. Underwriting acceptance D. Within three days of application

A. No later than the time of application

6. Which of the following statements is false? A. Comparisons must be fair and accurate B. Fines for violation of the advertising rules shall be up to $1,000 and or license suspension or revocation C. Testimonials must be genuine and accurately reproduced D. When the term non-medical is used in and advertisement there are no additional disclosure rules

D. When the term non-medical is used in and advertisement there are no additional disclosure rules

18. To qualify for accelerated benefits which of the following is correct? A. The insured must either suffer from a terminal medical condition, or have a qualified condition that requires skilled nursing care B. The insured must be sick C. The insured may only qualify for accelerated benefits within 6 months of their death D. The insurer may place restrictions on the insured's use of the proceeds

A. The insured must either suffer from a terminal medical condition, or have a qualified condition that requires skilled nursing care

At age 30, Tom Morris wishes to purchase a Whole Life policy. His producer explains that he can pay for the policy in several ways. One method is called 20-Pay Life, and another, Straight Life. Tom wishes to know which plan will accumulate cash value at a faster rate in the early years of the policy. Which of the following would be the producer's most appropriate response? A. "Straight Life will accumulate cash value faster." B. "20-Pay Life will accumulate cash value faster."

B. "20-Pay Life will accumulate cash value faster." EXPLANATION: You can simply remember this truism: The shorter the premium-paying period, the more expensive the premiums and the faster the cash value builds. Since all the policies mentioned are forms of Whole Life, reaching their maturity at age 100, the only thing different is the premium-paying period. A 20-Pay Life requires that all the premiums be paid within 20 years from the day it is purchased. A Straight (or Ordinary) Whole Life policy requires the premiums to be paid to age 100. If Tom is now 30, the assumption is that he would have to pay premium to age 100, or 70 years. Obviously, 20-Pay Life, which would require the premiums to be paid in over three times as fast, would be much more expensive and would also build cash value much faster.

21. Which of the following correctly defines terminal illness? A. A condition believed to result in death within 12 months B. A condition believed to result in death within 24 months C. A condition that the insured is expected to recover from D. A condition that is temporary

B. A condition believed to result in death within 24 months

An Insurance company will grant an advance from the cash value of a life insurance policy when the policy owner requests which of the following? A. A low-interest dividend loan B. A policy loan C. A loan from extended term insurance D. An automatic premium loan

B. A policy loan EXPLANATION; A policy loan may be requested by the insured anytime there is a cash value present. Some companies do require that you leave a certain min amt in your cash value, so you cannot borrow it all. The Max. interest rate on policy loans varies by state law. However your company may not charge an interest rate higher than the one stated in its policy initially. Loans do not have to be paid back while the insured is alive, since all loans plus overdue interest on them will be subtracrted from policy proceed in the event that the that the insured dies with a loan outstanding. Insurance companies may defer granting policy loans for up to 6 months, although they seldom do.

19. All of the following medical conditions are on the qualified medical conditions list, thereby resulting in a payment of up to 75% of the policy's face amount prior to death EXCEPT: A. Heart attack B. Appendicitis C. Stroke D. Life threatening cancer

B. Appendicitis

The provision in a Life insurance policy that provides protection against unintentional policy lapse is known as the: A. Waiver of Premium benefit B. Automatic Premium Loan provision C. Reduction of Premium option D. Payor clause

B. Automatic Premium Loan provision EXPLANATION: Automatic Premium Loan (APL) is a rider that can be added to any Life insurance policy that has or will have a cash value. It cannot be added to Term insurance. It is usually free, but the producer or client must check this option on the application. If the policy has a cash value and the insured forgets to pay the premium when due, the policy will not lapse, since it will borrow from itself to pay the overdue premium. Remember, this is a rider, not a non-forfeiture option. However, when the insured dies, all loans are subtracted from policy proceeds, so the beneficiary's pay-out may be reduced.

Which of the following statement is true about exercising a a guaranteed insure-ability option? I, The new ins. is available at the original issue age rate. II. Evidence of insure-ability is not required III. The ins. can exercise the option at any time IV. The maximum purchase is specified in the contract A. I and II. B. II. and IV. C. III. and IV. D. I., II. and III

B. II. and IV. The guaranteed insurablility option allows the insured specific options dates in the future to buy additional insurance, up to the original policy face amount, regardless of health at the insured's current age

Which of the following statements about the Misstatement of Age provision in a Life insurance policy is true? A. If the insured's age has been overstated, it provides that a premium refund and the face amount of the policy will be payable B. If the insured's age has been understated, it provides that a death benefit smaller than the face amount of the policy will be payable C. It becomes inoperative after the expiration of the policy's Contestable period D. It is an optional provision

B. If the insured's age has been understated, it provides that a death benefit smaller than the face amount of the policy will be payable (The Misstatement of Age provision is separate from the Incontestability Clause. Lying about your age cannot void the policy. However, it can reduce the amount of benefits paid at the time of your death. The formula to calculate this is as follows: The client is 40, but states he is 30, to get a lower rate. He buys a $100,000 policy. His premium paid is $200 per year. At the correct age, he should have paid $400 per year.) (CLIENT DID PAY $200 ÷ CLIENT SHOULD PAY $400) x FACE AMT. $100,000 = AMT. PAID AT DEATH $50,000 (The formula is: "Did" / "Should" x Face Amount = Amount Paid. In this example, the insurance company will pay 200/400, or 1/2 of the face amount the client thought he was buying.)

Which of the following is an example of a limited pay life policy? A. Whole Life B. Life Paid-up at Age 65 C. Renewable term to age 70 D. Universal Life

B. Life Paid-up at Age 65 EXPLANATION; There are two basic types of life insurance: whole life and term. Limited pay life policies such as LP65 and 20 pay life, are variations of whole life (sometimes called straight life or ordinary life): the premium-paying period has been shortened, but the policy still does not mature until age 100

24. All of the following are allowable before payment of the accelerated benefit EXCEPT: A. Requiring medical evidence of the insured's illness or qualified condition B. Obtaining approval from revocable beneficiaries C. Obtaining approval from irrevocable beneficiaries D. Conducting a medical exam of the insured

B. Obtaining approval from revocable beneficiaries

1/2/26 If the insured dies 5 years after he bought a Life insurance policy and the insurer determines that there was material misrepresentation on his application, they will: A. Deny the claim but refund the premium B. Pay the claim C. Pay only a portion of the claim D. Deny the claim

B. Pay the claim EXPLANATION: Under state law, Life insurance policies are only 'contestable' for the first 2 years. After 2 years, the policy is 'incontestable', which means that the insurer must pay all claims, even if there was material misrepresentation on the original application.

Which of the following statements is true about the premium payment schedule for a Whole Life policy? A. Premiums are payable until the insured's retirement only, after which coverage is continued automatically until the insured's death B. Premiums are payable throughout the insured's lifetime, and coverage continues until the insured's death

B. Premiums are payable throughout the insured's lifetime, and coverage continues until the insured's death EXPLANATION: Whole Life insurance assumes that the insured will pay the premiums until he dies or until age 100, whichever comes first. If the insured is still alive at age 100, the policy will reach maturity and pay the insured the face amount or cash value, whichever is more. This is because the insurance company's Mortality Table states that everyone has died by their 100th birthday. An insured, who would like to retire at age 65, keeping his Life insurance in force but discontinuing premium payments, should consider buying an LP65, which is a Whole Life policy with a limited payment period. Of course, the shorter the premium paying period, the higher the premium.

1/3/1 A producer takes an application from a proposed insured without receiving payment of the first premium. The insurance company issues the policy and, when the producer visits the proposed insured to deliver it, she realizes that the health of the applicant has deteriorated significantly since the application was taken. The producer should: A. Obtain the premium from the prospect and send it to the company immediately B. Refuse to deliver the policy or to accept any premium offered C. Rate the policy and obtain any additional premium required D. Deliver the policy as it was issued

B. Refuse to deliver the policy or to accept any premium offered Explanation: Remember, due to lack of consideration, no valid contract exists yet. Therefore, the producer, who is bound to protect the company, should refuse to deliver the policy or accept any premium offered.

An applicant has been denied insurance coverage because of information contained in a consumer report. According to the Fair Credit Reporting Act, all of the following statements are true about this situation, EXCEPT: A. The applicant has the right to obtain the identity of other inquirers who have obtained consumer reports on him within the past six months from the reporting agency B. The applicant has the right to obtain a copy of the consumer report directly from an insurance company that used the report C. The reporting agency cannot issue any report containing adverse information about the applicant that predates the report by more than seven years, except in the case of a bankruptcy, which may be reported for a 14-year period D. The applicant has the right to obtain disclosure of the substance of the information in the consumer report from the reporting agency

B. The applicant has the right to obtain a copy of the consumer report directly from an insurance company that used the report Explanation: The Fair Credit Reporting Act is a federal law that is designed to protect individuals who are being investigated by Consumer Reporting Agencies or Credit Bureaus. The law requires pre-notification of any possible investigation and post-notification if any adverse underwriting action is taken by the company as a result of the information received from a credit bureau. An applicant for insurance also has the right to request a copy of the credit report that the company obtained. However, this report may not be obtained directly from the insurance company, but only from the credit bureau that made the report. Remember, pre-notification must be IN WRITING, and when the applicant signs an application, this disclosure by the company that it may order an investigative type report is usually located right above the applicant's signature line.

Which of the following contracts requires that a series of benefit payments be made at specified intervals? A. Modified Whole Life B. 20-Pay Life C. Annuity D. Ordinary Whole Life

C. Annuity

The life insurance policy provision that prevents the insurer from modifying a policy after it has been issued is the: A. Insuring Clause B. Incontestability Clause C. Entire Contract Clause D. Consideration Clause

C. Entire Contract Clause EXPLANATION: The Entire Contract Clause prevents the insurer from modifying a policy once it has been issued. The Entire Contract, which consists of the policy and the application, if attached, is the only document that is admissible in court.

1/2/30 The life insurance policy provision that prevents the insurer from modifying a policy after it has been issued is the: A. Insuring clause B. Consideration clause C. Entire contract clause D. Incontestability clause

C. Entire contract clause EXPLANATION: The entire contract clause prevents the insurer from modifying a policy once it has been issued. The entire contract, which consists of the policy and the application, if attached, is the only document that is admissible i n court.

A 45-year old customer who is seeking to supplement his retirement income at age 65 would not buy a: A. Variable Annuity B. Deferred Annuity C. Immediate Annuity D. Equity Indexed Annuity

C. Immediate Annuity

Which of the following is true about the misstatement of age provision? A. It allows the insurer to change the premium B. It allows the insurer to contest a claim during the first 2 years C. It allows the insurer to adjust benefits D. lt allows the insurer to void the contract

C. It allows the insurer to adjust benefits EXPLANATION: A life insurance claim may not be contested for misstatement of age. However, if the insured understates his age in order to obtain a lower premium, at his death the insurer will adjust his benefits according to what the incorrect premium would have purchased at his correct age. The misstatement of age clause applies indefinitely.

11. Duties of the replacing insurer include all of the following EXCEPT: A. Maintain records related to replacement for 3 yrs B. Send to the existing insurer, within three days of receiving the replacement app. the Notice Regarding Proposed Replacement of Life Ins. or Annuity C. Keep records related to replacement for five years D. Make sure that the producer signs the Notice

C. Keep records related to replacement for five years

The purpose of the grace period is to: A. Protect the insurer against adverse selection B. Give the insurer time to determine the cause of death C. Protect the policy owner against unintentional lapse D. Give the beneficiary time to prove that insurable interest exists

C. Protect the policy owner against unintentional lapse EXPLANATION: A life insurance policy will lapse (terminate) at the end of the grace period, which may be as long as 31 days. During the grace period, the insured is still covered, and death claims will be paid, less the overdue premium.

1/2/17 Which of the following is a Non-forfeiture Option that provides continuing cash value buildup? A. Deferred Annuity B. Cash Surrender C. Reduced Paid-Up D. Extended Term

C. Reduced Paid-Up EXPLANATION: There are only three non-forfeiture options: Cash Surrender, Reduced Paid-Up, and the automatic option, Extended Term. Their purpose is to protect the insured's accumulated cash value in case the Whole Life policy lapses. A client has 60 days from the policy's premium due date to select the option she prefers. If none is selected, the company will give the client the automatic option, Extended Term. Here, the face amount of the new policy is the same as on the initial policy. The accumulated cash value is used internally by the company to pay the premium for a new Term policy at the insured's attained age. The policy term is however long that amount of money will buy. There is no cash value, and at the expiration of the term the policy expires and the insured has no further coverage. If the client selects the Reduced Paid-Up option, the company then uses all of the accumulated cash values to buy the client internally a new Whole Life policy paid up to age 100. It would have an immediate cash value, but no further premiums would ever be due. The face amount would be more than the accumulated cash value, but less than the original face amount of the initial policy, so it is called Reduced Paid-Up. Cash value would continue to accumulate, and at maturity (age 100) the cash value would equal the face amount. No physical exam is required. Of course, if the client takes Cash Surrender, there is no further coverage.

What life Ins. policy provision applies if a policy lapsed last year and the insured wants it back? A. Assignment B. Non-forfeiture C. Reinstatement D. Grace period

C. Reinstatement If your policy lapses, most insurers will allow you to apply for reinstatement for up to 5 years. Reinstatement is subject to proof of insurablity and the payment of all overdue premiums. It si better to reinstate rather than buy a new policy, since the premium on your reinstatement policy will be based on your original age.

An Insured died during the grace period of her life Ins. policy and had not paid the required annual premium. The Ins. company is obligated to pay which of the following to the beneficiary. A. The cash value of the policy, If any B. The full face amount of the policy C. The face amt. of the policy less any earned premiums D. A Refund of any premium paid.

C. The face amount of the policy less any earned premiums EXPLANATION: 3 GRACE PERIODS 28 Days Industrial life 30 Days all other life 31 Days on group life Policy will not lapse until the end of the grace period. If the client dies within the grace period, it is assumed he / she would have paid his premium so the company will pay the face amount to the beneficiary less any over due premiums

A life insurance policy that combines term insurance protection, a flexible premium, and cash value accumulation is: A. Increasing Term Life B. Variable Life C. Universal Life D. Variable/Universal Life

C. Universal Life

If a person wants to invest a lump sum in an annuity that may appreciate along with market and economic conditions, they should buy a: A. Deferred Annuity B. Fixed Annuity C. Variable Annuity D. Flexible premium Annuity

C. Variable Annuity

7. In which of the following situations would the replacement rules apply? A. When replacing group life B. When replacing credit life C. When the insured borrows more than 25% of the old policy's cash value to purchase the new policy D. When replacing group annuity

C. When the insured borrows more than 25% of the old policy's cash value to purchase the new policy

A producer completes an application for Life insurance and sends it to the underwriter who approves it and issues the policy. When is coverage effective: A. Immediately B. On the date the underwriter approved the application C. When the producer delivers the policy and picks up the premium D. On the date the client signed the application

C. When the producer delivers the policy and picks up the premium EXPLANATION: On the state exam, don't assume that the premium has been paid. A producer may send the underwriter a 'submittal' application, just to find out if the applicant is insurable. If the underwriter issues the policy, coverage would start when the producer delivers the policy and picks up the premium, along with a Statement of Continued Good Health

15. Solicitations regulations do not apply to the following types of life insurance EXCEPT: A. Annuities B. Group life C. Whole life D. Variable life

C. Whole life

A $10,000 Life insurance policy with a Triple Indemnity clause has been in force for three years. The insured is injured in a train wreck and dies in a hospital five months later. The death proceeds payable under the policy would be: A. $ -0- B. $30,000 C. $20,000 D. $10,000

D. $10,000 EXPLANATION: Accidental Death Benefit (ADB), sometimes called Double or Triple Indemnity, is a rider that may be attached to any Life insurance policy for an extra premium charge. The additional benefits are paid only if the insured dies within 90 days of an accident. If the insured lingers beyond 90 days, the policy reverts back to single indemnity only, and the face amount without the rider is paid, since it is assumed that death resulted more from natural causes than as a result of the accident.

A business owner with a fluctuating income who wants a life insurance policy that can be changed to suit economic conditions should buy: A. Interest-sensitive Whole Life B. Modified Whole Life C. Variable Life D. Adjustable Life

D. Adjustable Life

5. Records related to advertisements must be kept on file by the insurer for how long? A. Two years B. Three years C. Five years D. Four years

D. Four years

If the insured understated his age and the error is discovered after the insured's death, the insurance company will: A. Deny the claim under the incontestability clause B. Refund all premiums paid plus accumulated interest C. Pay the claim, less a deduction for the amount of the underpaid premium D. Pay the amount that the premium paid would have purchased at the correct age.

D. Pay the amount that the premium paid would have purchased at the correct age. EXPLANATION: A life insurance claim may not be contested for misstatement of age. However if the insured understates his age in-order to obtain a lower premium at this death the insurer will adjust his benefits according to what the incorrect premium would have purchased at this correct age. The misstatement of age clause applied indefinitely

1/2/24 In a policy insuring the life of a child, which of the following allows the premiums to be waived in the event of the death or disability of the person responsible for premium payments? A. Waiver of Premium provision B. Reduced Paid-Up option C. Reduction of Premium option D. Payor Benefit Rider

D. Payor Benefit Rider EXPLANATION: The Payor Provision (sometimes called Payor Waiver of Premium) is an optional provision (or rider) often added to a policy insuring the life of a minor. The adult (usually the parent) may become sick or disabled and become incapable of paying the premium. This rider will then pay the premium on behalf of the sick or disabled payor. However, it is exactly like the Waiver of Premium Rider you would see on your own Life insurance policy in that both riders have a 6-month "waiting period" before premiums are retroactively paid. Both riders cost extra and will automatically drop off at age 60 or 65 at which time the premium would be reduced. The extra premium for these riders must be shown separately from the premium charged for the Life insurance. None of the extra premium charge goes toward cash-value accumulation.

1/6 A life insurance policy whose cash value will fluctuate depending upon the performance of a separate account is; A. Ordinary Life B. Limited Pay Life C. Universal life D. Variable life

D. Variable life Explanation: Variable Life has no guaranteed rate of return since its performance is tied to an underlying 'separate account', which is very similar to a mutual fund. However, variable life does have a minimum guaranteed death benefit, which will never be less than the amount of coverage initially purchased. A securities license is required.

1/2/16 The time period covered by the Free Look provision of a Life insurance contract starts: A. When the contract is received in the agency office and given to the producer B. When the contract is issued and mailed to the agency office from the home office of the insurance company C. When the insured receives the contract and a "right to look" receipt D. When the insured receives the contract and makes the first premium payment, if needed

D. When the insured receives the contract and makes the first premium payment, if needed EXPLANATION: The Free Look never begins until the policy is actually delivered. Even if the premium had been paid previously, the Free Look would not have begun until policy delivery. If the client returns the policy to the insurer within the time period specified (varies by state law), she would get all of her money back.