Insurance

According to the life insurance replacement regulations, which of the following would be an example of policy replacement? a) A term policy expires, and the insured buys another term life policy. b) Term insurance is changed to a Whole Life policy. c) A lapsed policy is reinstated within a specific timeframe. d) A policy is reissued with a reduction in cash value.

A policy is reissued with a reduction in cash value.

When J. applied for a life insurance policy, the agent informed him that a medical exam would be required. The exam may be completed by a) A home office underwriter. b) A paramedic or examining physician at the insurer's expense. c) The agent. d) A physician of the applicant's choice and at his expense.

A paramedic or examining physician at the insurer's expense.

For how many years is an insurer required to maintain a complete file of its advertisements? a) 1 vear b) 2 years c) 4 years d) 5 years

4 years

What is the maximum fine for submitting a false or fraudulent claim to the insurer? a) $500 b) $1,000 c) $1,500 d) $2,000

$1,000

Articles of merchandise are allowed as gifts to insurance applicants as long as they do not exceed what maximum amount? a) $5 b) $10 c) $25 d) $100

$10

If an insurance agent has made a misrepresentation or incomplete comparison of policies for the purpose of inducing a potential client to purchase an insurance policy, the agent may be assessed a fine of up to a) $100 b) $500 c) $1,000 d) $2,000

$2,000

If $100.000 of life insurance proceeds were used in a settlement option, which paid $13,000 per year for ten years, which of the following would be taxable annually? a) $3,000 b) $13,000 c) $10,000 d) $7,000

$3,000

If an insurer terminates a producer, the Commissioner will receive a notification. Within how many days of this notification must the producer be sent a copy? a) 30 b) 7 c) 10 d) 15

15

If a statement of policy information is not furnished to the applicant at the time of application, how soon must the form be delivered to the applicant? a) 10 days b) 15 days c) 30 days d) 45 days

15 Days

Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insureds' death? a) The former wife of the deceased insured b) A minor son of the insured c) A business partner of the insured d) The wife of the deceased insured

A minor son of the insured

Which of the following riders pays a beneficiary a death benefit that is double or triple the face amount if the insured's death was caused by an accident as defined in the policy? a) A Double Indemnity Rider b) A Guaranteed Insurability Rider c) A Covered Peril Rider d) An Accidental Death Rider

An Accidental Death Rider

Which of the following is NOT a personal use of life insurance? a) An individual buys insurance to help the family pay off the mortgage in case of premature death. b) An individual buys insurance to fund a buy-sell agreement. c) An individual buys insurance to provide future income to a surviving spouse. d) An individual buys cash value insurance to fund his children's college education.

An individual buys insurance to fund a buy-sell agreement.

Which of the following is a short-term annuity that limits the amounts paid to a certain fixed period or until a certain fixed amount is liquidated? a) Annuity certain b) Fixed annuity c) Refund life d) Variable annuity

Annuity certain

Which concept is associated with "exclusion ratio"? a) How exclusion riders affect an insurance premium b) Policy provisions c) Annuity payments d) Dividend distribution

Annuity payments

An underwriter is reviewing the medical questions in the application and needs further information due to a medical situation the applicant had in the past. What will the underwriter require? a) A complete medical record b) Sworn health affidavit from the applicant c) Statement of Continued Good Health d) Attending Physician Statement

Attending Physician Statement

Which of the following would NOT trigger the payment of Accelerated Death Benefits? a) Being permanently disabled b) Terminal illness c) Requiring an organ transplant for the insured to survive d) Being permanently institutionalized

Being permanently disabled

What limits the amount that a policyowner may borrow from a whole life insurance policy? a) Amount stated in the policy b) Face amount c) Cash value d) Premiums paid

Cash Value

M, who is not licensed as an insurance agent, works part-time in her father's insurance agency. M may perform all of the following duties EXCEPT a) Call prospects and collect expiration dates of their existing policies for her father. b) Collect premium for in-force policies and explain coverages to clients that have existing policies written by her father. c) Make appointments with clients and prospective clients

Collect premium for in-force policies and explain coverages to clients that have existing policies written by her father.

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated? a) Representation b) Adhesion c) Consideration d) Good faith

Consideration

Which of the following is NOT an example of a valid insurable interest? a) Business partners in each other's lives b) Emplover in key emplovee's life c) Child in parents' lives d) Debtor in the life of the creditor

Debtor in the life of the creditor

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.

Defamation

Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income? a) Annuitization period b) Pay-out period c) Liquidation period d) Depreciation period

Depreciation period

In insurance, the agents have authorization to represent the company and may exercise this relationship through a) Underwriting department, actuarial department and claims department. b) Reciprocal authority, risk retention and reinsurance. c) Express authority, implied authority and apparent authority. d) Domestic authority, foreign authority and alien authority.

Express authority, implied authority and apparent authority.

When a whole life policy is surrendered for its nonforfeiture value, what is the automatic option? a) Reduced paid up b) Extended term c) Paid up additions d) Cash surrender value

Extended term

Which statement regarding insurable risks is NOT correct? a) An insurable risk must involve a loss that is definite as to cause, time, place and amount. b) Insureds cannot be randomly selected. c) Insurance cannot be mandatory. d) The insurable risk needs to be statistically predictable.

Insurance cannot be mandatory.

All of the following are considerations under the needs approach planning for life insurance EXCEPT a) Education fund. b) Insured's income. c) Emergency reserve funds. d) Debt cancellation.

Insured's income.

The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose? a) Fixed amount option b) Interest only option c) Life income with period certain d) Joint and survivor

Interest only option

Which of the following is NOT true of the agent's implied authority? a) It is incidental to express authority. b) It is given to an agent by the insurance company that is not specifically communicated. c) It is specifically stated in the contract. d) It is assumed by the agent in order to transact the business of insurance.

It is specifically stated in the contract.

In this state, what type of violation is rebating? a) Criminal offense b) Class C violation c) Felony d) Misdemeanor

Misdemeanor

A participating insurance policy may do which of the following? a) Require 80% participation b) Pay dividends to the policyowner c) Provide group coverage d) Pay dividends to the stockholder

Pay dividends to the policyowner

Key person insurance can provide protection for all of the following economic losses to a business EXCEPT a) Fund the cost of training a current employee to perform the duties of a deceased employee. b) Pay the death benefit to the estate of the insured. c) Provide deferred compensation retirement benefit if the insured key person survives to retirement. d) Fund the expense of finding a suitable replacement following the death of an employee.

Pay the death benefit to the estate of the insured.

An Equity Indexed Annuity will grow based upon a) Performance in a separate account. b) Current interest rates. c) A rate of interest determined by the banking system. d) Performance of a recognized index.

Performance of a recognized index.

Which of the following individuals must have insurable interest in the insured? a) Producer b) Policyowner c) Beneficiary d) Underwriter

Policyowner

All of the following are characteristics of group life insurance EXCEPT a) Amount of coverage is determined according to nondiscriminatory rules. b) Individuals covered under the policy receive a certificate of insurance. c) Certificate holders may convert coverage to an individual policy without evidence of insurability. d) Premiums are determined by the age, sex and occupation of each individual certificate holder.

Premiums are determined by the age, sex and occupation of each individual certificate holder.

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 to performance of the test d) Prior to ordering a physical examination

Prior to performance of the test

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) Birth of a child. b) Marriage. c) Purchase of a new home. d) Approximately every 3 years between the ages of 25 and 40.

Purchase of a new home.

What type of insurer uses a formal sharing agreement? a) Mutual insurers b) Fraternal Benefit Societies c) Reciprocal insurers d) Stock insurers

Reciprocal insurers

The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this? a) Paid-up addition b) Accumulation at interest c) Cash option d) Reduction of premium

Reduction of premium

If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may a) Prolong the open enrollment period. b) Increase medical requirements on existing members c) Require evidence of insurability. d) Require a higher premium.

Require evidence of insurability.

An applicant buys a nonqualified annuity, but dies before the starting date. For which of the following beneficiaries would the interest accumulated in the annuity NOT be taxable? a) Dependents b) Annuitant c) Spouse d) Charitable organization

Spouse

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

Stock insurers are owned by the shareholders and issue nonparticipating policies.

What is the exclusion ratio used to determine? a) The interest base and the payout base. b) The benefit amounts to be paid to the annuitant. c) The annuity benefit to be excluded from taxes. d) The premium amounts to be included in taxes.

The annuity benefit to be excluded from taxes.

If a life insurance policy has an irrevocable beneficiary designation, a) The owner can always change the beneficiary at will. b) The beneficiary cannot be changed. c) The beneficiary can only be changed with written permission of the beneficiary.

The beneficiary can only be changed with written permission

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then a) The benefit is subject to the exclusionary rule. b) IRS has no jurisdiction. c) The benefit is received as taxable income. d) The benefit is received tax free.

The benefit is received tax free.

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.

The insured

All of the following statements are true regarding installments for a fixed amount EXCEPT a) Value of the account and future earnings will determine the time period for the benefits. b) This option pavs a specific amount until the funds are exhausted. c) The annuitant may select how big the payments will be. d) The payments will stop when the annuitant dies.

The payments will stop when the annuitant dies.

How must a replacing producer respond to an applicant wishing to replace existing life insurance? a) The producer must provide the applicant with a Notice Regarding Replacement. b) The producer must collect the existing policies and turn them over to the replacing insurer. c) The producer must request the permission of the existing insurer. d) The producer has no specific duties.

The producer must provide the applicant with a Notice Regarding Replacement.

Under an extended term nonforfeiture option, the policy cash value is converted to a) The same face amount as in the whole life policy. b) The face amount equal to the cash value c) A lower face amount than the whole life policy. d) A higher face amount than the whole life policy.

The same face amount as in the whole life policy

Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit? a) Universal Life - Option A b) Universal Life - Option B c) Equity Indexed Universal Life d) Variable Universal Life

Universal Life - Option A

Considering the principles of liquidity, how would the policyowner use today's cash values in a life insurance policy? a) Fund a retirement b) Use it for emergency expenses c) Secure a car loan next year d) Make a down payment on a home in 5 years

Use it for emergency expenses

When would a 20-pay whole life policy endow? a) After 20 payments b) In 20 years c) When the insured reaches age 100 d) At the insured's age 65

When the insured reaches age 100

For the purpose of insurance, risk is defined as a) The certainty of loss. b) The cause of loss. c) An event that increases the amount of loss. d) The uncertainty or chance of loss.

the uncertainty or chance of loss

An IRA contribution can be made from which of the following? a) Life insurance b) Collectibles c) Stocks and bonds d) Cash

Cash

An insured receives an annual life insurance dividend check. What term best describes this arrangement? a) Reduction of Premium b) Annual Dividend Provision c) Accumulation at Interest d) Cash option

Cash Option

When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount? a) In lesser amounts for the remaining policy term of age 100 b) Equal to the cash value surrendered from the policy c) The same as the original policy minus the cash value d) Equal to the original policy for as long as the cash values will purchase.

Equal to the original policy for as long as the cash values will purchase.

J is receiving fixed amount benefit payments from his late wife's insurance policy. 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) Fixed Period b) Interest Only c) Joint and Survivor d) Fixed Amount

Fixed Amount

Which authority is NOT stated in an agent's contract but is required for the agent to conduct business? a) Apparent b) Assumed c) Express d) Implied

Implied

Which authority is NOT stated in an agent's contract but is required for the agent to conduct business? a) Assumed b) Express c) Implied d) Apparent

Implied

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

It provides the highest monthly benefit.

Which of the following best describes pure life annuity? a) It continues payments to the beneficiary when the annuitant dies. b) It is also known as refund life annuity. c) It guarantees to pay out all the proceeds. d) It provides the highest monthly benefits.

It provides the highest monthly benefits.

#81. Which statement is NOT true regarding a Straight Life policy? a) The face value of the policy is paid to the insured at age 100. b) It usually develops cash value by the end of the third policy year. c) It has the lowest annual premium of the three types of Whole Life policies. d) Its premium steadily decreases over time, in response to its growing cash value.

Its premium steadily decreases over time, in response to its growing cash value.

All of the following statements about mutual insurance companies are correct EXCEPT a) Policy dividends issued by mutual companies are guaranteed and not taxable. b) Dividends allow policyholders to share in a mutual company's divisible surplus. c) Dividends are a return of unused premiums. d) Mutual companies issue policies referred to as participating.

Policy dividends issued by mutual companies are guaranteed and not taxable.

Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value? a) Predicted needs of the family after the insured's death. b) Insured's current and future income. c) Insured's annual expenses. d) Effect of inflation on income over time.

Predicted needs of the family after the insured's death.

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

Premium payment period

If the annuitant dies before the annuity start date, which of the following is true? a) The interest is taxable. b) The interest will not be tax deferred. c) The interest is tax free if the beneficiary is a spouse. d) The interest is nontaxable.

The interest is taxable.

All of the following are TRUE statements regarding the accumulation at interest option EXCEPT a) The policyholder has the right to withdraw the accumulations at any time. b) The interest is not taxable since it remains inside the insurance policy. c) The annual dividend is retained by the company. d) The interest is credited at a rate specified by the policy.

The interest is not taxable since it remains inside the insurance policy.

If an insurer terminates a producer, the Commissioner must be notified. How many days does the insurer have to deliver this notice? a) 7 days b) 3 days c) 30 days d) 10 days

30 days

An IRA uses immediate annuities to pay out benefits; the IRA owner is nearly 75 years old when he decides to collect distributions. What kind of penalty would the IRA owner pay? a) No penalties, since the owner is older than 59 1 b) 10% for early withdrawal c) 15% for early withdrawal d) 50% tax on the amount not distributed as required

50% tax on the amount not distributed as required

Licensees who are currently licensed, and have recently become residents of the state of Michigan may not have to complete any prelicensing education. To qualify for this exemption, they must apply to become resident licensees within a few days of establishing a legal residence within how many days? a) 7 days b) 90 days c) 30 days d) 60 days

90 days

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.

Continue to increase.

What is another name for interest-sensitive whole life insurance? a) Term life b) Adjustable life c) Current assumption life d) Variable life

Current assumption life

An insured purchases a nonparticipating whole life policy. This policy includes all of the following EXCEPT a) Cash and loan values. b) Dividends. c) A premium calculated closely to the cost of the insurance. d) Permanent protection.

Dividends

An insured purchases a nonparticipating whole life policy. This policy includes all of the following EXCEPT a) Permanent protection. b) Cash and loan values. c) Dividends. d) A premium calculated closely to the cost of the insurance.

Dividends

All of the following are ways to handle risk EXCEPT a) Transfer b) Elimination. c) Avoidance. d) Reduction.

Elimination

If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a a)Guaranteed insurability rider. b) Paid-up additions option. c) Cost of living provision. d) Nonforfeiture option.

Guaranteed insurability rider.

If a loan request is for payment of due premiums on the policy, how soon must the insurer issue a loan? a) Immediately b) Within 10 days c) Within 30 days d) Within 90 days

Immediately

How many hours of Continuing Education are required to maintain a Counselor's license? a) 24 b) 30 c) None d) 12

None

Cash Value guarantees in a whole life policy are called a) Dividends. b) Nonforfeiture values. c) Living Benefits. d) Cash Loans.

Nonforfeiture values.

Are insurance company underwriters allowed to discriminate? a) Yes, but not unfairly b) No, higher risks pay higher premium c) No, discrimination is an unfair practice d) Yes, but only for gender

Yes, but not unfairly

Which of the following would NOT be eligible for coverage under key person? a) The manager of a small store b) The owner of a shop c) The executive officer of a company d) The pharmacist in a drug store

The owner of a shop

A man wants to buy a life insurance policy in which he can count on guaranteed minimum benefits. Which type should he buy? a) Variable b) Solid c) Fixed d) Level

Fixed

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

The insureds each own their own contract.

All of the following are true regarding the waiver of cost of insurance rider EXCEPT a) The rider expires when the insured reaches age 60. b) The rider waives insurance costs in the event the insured becomes disabled. c) The rider is only applicable to universal life policies. d) The rider cannot waive the cost of premiums that accumulate cash value.

The rider expires when the insured reaches age 60.

Which of the following is NOT a goal of risk retention? a) To increase control of claim reserving and claims settlements b) To fund losses that cannot be insured c) To minimize the insured's level of liability in the event of loss d) To reduce expenses and improve cash flow

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

All of the following statements are true regarding an Ordinary (Straight) Life policy EXCEPT a) It does not have a guaranteed death benefit. b) It is funded by a level premium. c) It builds cash value. d) If the insured lives to age 100, the policy matures, and the face amount is paid to the insured.

It does not have a guaranteed death benefit.

Which of the following best describes the MIB? a) It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance. b) It is a government agency that collects medical information on the insured from the insurance companies. c) It is a member organization that protects insured against insolvent insurers. d) It is a rating organization for health insurance.

It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance.

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 policyowner select? a) Life income b) Joint and Survivor c) Fixed-amount installments d) Fixed-period installments

Joint and survivor

A college student will graduate next year. His studies have limited his ability to work, so he has borrowed funds to pay for his education. He would like to start a permanent life insurance program that would cover his debt and still be affordable during the period he is establishing his earning potential. An appropriate policy would be a) Modified Whole Life. b) Current Assumption Whole Life c) Level Term to age 65. d) Single Premium Whole Life.

Modified Life

All of the following are allowed practices regarding producer's commissions EXCEPT a) Sharing commissions with a licensed nonresident producer in the same line of authority. b) Offering a financial reward to an unlicensed individual for providing a sales lead. c) Sharing commissions with another licensed producer. d) Paying deferred commissions to a producer who is no longer licensed for sale of insurance products while the producer was licensed.

Offering a financial reward to an unlicensed individual for providing a sales lead.

Insurance contracts are unilateral in nature. What does that mean? a) All parties to the contract exchange something of value. b) A promise is made only at the time of policy application. c) Only one party makes a promise. d) The insured must make a promise to pay the premium.

Only one party makes a promise.

Life insurance creates an immediate estate. Which of the following best explains this statement? a) The face value of the policy is payable to the beneficiary upon the death of the insured. b) The policy has cash values and nonforfeiture values. c) The policy generates immediate cash value. d) The death benefit will always be paid to the estate of the insured.

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

Which of the following is NOT a characteristic of an insurable risk? a) The loss exposure must be large. b) The loss must be catastrophic. c) The loss must be due to chance. d) The loss must be measurable.

The loss must be catastrophic.

A graded premium life insurance policy is a modified form of a) Deferred Annuity. b) Universal Life. c) Whole Life. d) Level Term.

Whole life

An aleatory contract is based on what kind of exchange? a) Equal amounts for pay in and pay out b) Balanced benefits c) Exchange of equal obligations d) Unequal exchange of values

Unequal exchange of values

An insurance company receives an application with some information missing and issues the policy anyway. What is this called? a) Aleatory b) Waiver c) Estoppel d) Subrogation

Waiver

Who can make changes to the policy once it is in effect? a) The insured b) The policyowner c) The agent d) An executive officer of the insurer

An executive officer of the insurer

The family term rider incorporates a) Key person whole life and dependents term. b) Cost of living rider and family protection rider. c) Spouse term and children's term. d) Whole life and other-insured term.

Spouse term and children's term.

When an insurance agency published an advertising brochure, it emphasized the company's financial stability and sound business practices. In reality, its financial health is terrible, and the company will soon have to file for bankruptcy. Which of the following terms best describes the advertisement? a) Rebating b) False financial statement c) Defamation d) Twisting

False financial statement

Which of the following best describes a rebate? a) A producer returning part of her commission to her client, as an inducement to buy b) A producer misrepresenting policy provisions or coverages at issue c) A producer requiring an insured to buy insurance from her as a condition to a loan d) A producer selling insurance primarily to himself, his family and his friends

A producer returning part of her commission to her client, as an inducement to buy

When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable. the contract is a) Aleatory. b) Personal. c) Unilateral. d) Conditional.

Conditional