Insurance Agent License Exam Prep

When is the face amount paid under a Joint Life and Survivor policy?

Upon death of the last insured

Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?

Variable Life

S owns a life insurance policy with cash values that fluctuate according to the underlying investment performance of common stocks. Which of these policies does S own?

Variable Whole Life

Life insurance immediately creates an estate upon the death of an insured. Which of the following policies is characterized by a guaranteed minimum death

Variable life

A life policy that contains a monthly mortality charge as well as self-directed investment choices is called a(n)

Variable universal life policy

A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?

Waiver of Premium

Which of these is considered a statement that is assured to be true in every aspect?

Warranty

At what point does an informal agreement become a binding contract?

When consideration is provided by one of the parties to the contract

At what point does a whole life insurance policy endow?

When the cash value equals the death benefit

When is the face amount of a Whole Life policy paid?

When the insured dies or at the policy's maturity date, whichever happens first

What type of insurance offers permanent life coverage with premiums that are payable for life?

Whole life

K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?

$20,000 death benefit

P purchases a $50,000 whole life insurance policy in 2005. One of the questions on the application asks if P engages in scuba diving, to which P answers "No". The policy is then issued with no scuba exclusions. In 2010, P takes up scuba diving and dies in a scuba-related accident in 2011. What will the insurer pay to P's beneficiary?

$50,000 minus any outstanding policy loans

A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?

20-Pay life accumulates cash value faster than straight life

K's whole life insurance policy lapsed two months ago due to nonpayment. She would now like to reinstate the policy. All of these statements are correct about the policy's reinstatement EXCEPT

K will forfeit the right to use the automatic loan provision upon reinstatement

K, age 45, and his wife, age 43, have three children. They purchase a Family Policy that covers K's wife to age 65. All of these situations will pay a death benefit EXCEPT

K's wife dies at age 66

Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements?

Legal purpose (insurable interest)

What kind of premium does a Whole Life policy have?

Level

Which of these are NOT an example of a nonforfeiture option?

Life Income

Which of these would be considered a Limited-Pay Life policy?

Life Paid-Up at Age 70

Which type of policy is considered to be overfunded, as stated by IRS guidelines?

Modified Endowment Contract

When a life insurance policy exceeds certain IRS table values, the result would create which of the following?

Modified Endowment Contract (MEC)

J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions?

Reinstatement provision

T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this?

Renewable

All of these statements about Equity Indexed Life Insurance are correct EXCEPT

The premiums can be lowered or raised, based on investment performance

What type of reinsurance contract involves two companies automatically sharing their risk of exposure?

Treaty Under treaty reinsurance, each party automatically accepts specific percentages of insurer's business.

Which of the following is considered an element of a Variable Life Policy?

Underlying equity investment

In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?

Unilateral

Life and health insurance policies are:

Unilateral contracts One party makes a promise, and the other party can only accept by performance

The cash value in a _________ life policy may fluctuate to reflect changing assumptions regarding mortality cost, interest and expense factors

Universal

What year was the McCarren-Ferguson Act enacted?

1945

Which of the following requires insurers to disclose when an applicant's consumer or credit history is being investigated?

1970- Fair Credit Reporting Act

A nonprofit incorporated society that does not have capital stock and operates for the sole benefit of its members is known as?

A Fraternal Benefit Society

N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take?

Claim will be denied

Insurance contracts are known as ____ because certain future conditions or acts must occur before any claims can be paid.

Conditional

Which of the following consists of an offer, acceptance, and consideration?

Contract

Which of the following types of policies pays a benefit if the insured goes blind?

AD&D Accidental Death & Dismemberment policy can provide financial benefits if an insured is killed, loses a limb, suffers blindness, or is paralyzed in a covered accident.

P is blinded in an industrial accident. Which provision of his life insurance policy will pay a stated benefit amount?

AD&D Clause

The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a:

AD&D rider

A contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of?

Adhesion

Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q suddenly dies and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features?

Aleatory

S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT

Beneficiary's age

All of the following are considered to be typical characteristics describing the nature of an insurance contract, EXCEPT:

Bilateral

Which statement regarding the Misstatement of Age provision is considered to be true?

Coverage will be adjusted to reflect the insured's true age if it is discovered

A company that owns a life insurance policy on one of its key employees may do all of the following EXCEPT

Change the policy's interest rate

S is covered by a whole life policy. Which insurance product can cover his children?

Child term rider

The combination of Whole Life and ____ Term insurance is referred to as a Family Income Poilcy

Decreasing

F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed?

Decreasing term policy

What provision in a life insurance policy states that the application is considered part of the contract?

Entire contract provision

D is the policyowner and insured for a $50,000 life insurance policy. The beneficiary is D's wife. D and his wife divorce and D remarries, transferring ownership of his policy to his new wife. If D dies without making any further changes, to whom will the policy proceeds be paid to?

Ex-wife

N is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event N was killed while flying as a student pilot?

Exclusion Specified hazards listed in a policy for which benefits will not be paid.

E & F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E & F eventually terminate their business, and four months later E dies. Although E was married with 3 children at the time of the death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E's life insurance policy be directed to?

F

What does a Face Amount Plus Cash Value Policy supposed to pay at the insured's death?

Face Amount Plus Cash Value Policy

An insurance applicant MUST be informed of an investigation regarding his/her reputation and character according to the:

Fair Credit Reporting Act (1970)

What is the name of the law that requires insurers to disclose information gathering practices and where the info was obtained?

Fair Credit Reporting Act (1970)

Taking receipt of premiums and holding them for the insurance company is an example of:

Fiduciary responsibility

A life insurance arrangement which circumvents insurable interest statutes is called:

IOLI Done when an investor persuades an individual to take out life insurance specifically for the purpose of selling the policy to the investor. The investor compensates the insured and makes the premiums, then collects the death benefit when the insured dies.

In regards to representations or warranties, which of these statements is TRUE?

If material to the risk, false representations will void a policy.

A life insurance policy would be considered a wagering contract WITHOUT:

Insurable interest

In a Life insurance contract, an insurance company's promise to pay stated benefits is called the:

Insuring clause

Which of these arrangements allows one to bypass insurable interest laws?

Investor-Originated Life Insurance (IOLI)

Which of these is NOT considered to be an element of an insurance contract?

Negotiating

When must insurable interest be present in order for a life insurance policy to be valid?

Only when the application is made

P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability?

P will still receive declared dividends.

Which statement is TRUE in regards to a policy loan?

Past-due interest on a policy loan is added to the total debt.

Which of the following provisions guarantees that premiums will be waived if a Juvenile Life policyowner becomes disabled?

Payor clause

Insurance policies are considered aleatory contracts because?

Performance is conditioned upon a future occurrence

Which of these describe a participating insurance policy?

Policyowners are entitled to receive dividends

Which of the following actions is NOT possible with a Universal Life policy?

Premiums may be applied as a credit against tax income

Which of these is NOT a type of agent authority?

Principal

What is the consideration given by an insurer in the Consideration clause of a life policy?

Promise to pay a death benefit to a named beneficiary.

Which of these Nonforfeiture Options continue a build-up of cash value?

Reduced Paid-up

The provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called

Reinstatement

T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of $10,000 policy should T purchase?

Ten-Year Endowment

What kind of life insurance product covers children under their parent's policy?

Term rider

D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary's receive?

The full face amount

A policy of adhesion can only be modified by whom?

The insurance company

A Term Life rider offers the insured

additional life coverage

What action will an insurer take if an interest payment on a policy loan is not made on time?

automatically add the amount of interest due to the loan balance

The automatic premium loan provision is designed to:

avoid a policy lapse

Variable Whole Life Insurance can be described as

both an insurance and securities product

Under an interest sensitive whole life policy

cash values are determined by interest rates

A Nonforfeiture clause gives the policyowner

guaranteed values even if the policy has lapsed

Variable Life products require a producer to

hold a Life Insurance license and a Securities license

A long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following?

inability of the insured to perform more than 2 ADLs.

When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have

insurable interest in the proposed insured

When a policy pays dividends to its policyholders, it is said to be?

participating

All of the following statements are true regarding a policy's grace period, except:

past due premiums are waived

B recently died and was insured with a life insurance policy for over five years. During the claims process, the insurer discovered that B had understated his age by 5 years at the time of application. In this situation, the insurer will

pay the amount that the premium would have purchased at the correct age

Credit Life Insurance

issued in an amount not to exceed the amount of the loan

A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision?

payor provision in the event of death or disability of the adult premium payor, the premiums on a juvenile policy will be waived until the insured child reaches a specified age or the maturity date of the contract.

Which of these characteristics is consistent with a Straight Life policy?

premiums are payable for as long as there is insurance coverage in force

What is the Suicide provision designed to do?

safeguard the insurer from an applicant who is contemplating suicide

If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?

the Insured

Under a Graded Premium Whole Life policy,

the premium increases each year during the early years of the contract and remains the same after that time

The advantage of reinstating an original life policy is

the premiums are based on a younger age

STOLI is when a person purchases life insurance only to sell to:

third party with no insurable interest

S, age 40, is looking to buy a Life Insurance policy that will allow for increases or decreases in coverage as his needs change. The policy best suited for S would be

universal life

A term life insurance policy matures:

upon the insured's death during the term of the policy

If a 10-Year Term Life policy contains a Renewability provision, the policy will renew

without evidence of insurability