Insurance Exam Study
Which type of insurer requires an attorney-in-fact overseen by an advisory committee of subscribers? Fraternal insurer Reciprocal insurer Reinsurer Mutual insurer
Reciprocal insurer Feedback A committee of subscribers holds the attorney-in-fact accountable in reciprocal insurance agreements.
At what age does Social Security Medicare program Part B start providing benefits? 62 67 65 60
65 Feedback Medicare Part B provides medical expense coverage to those 65 and older.
The primary regulator of all Health Maintenance Organizations (HMOs) in this state is the: California Department of Managed Health Care National Department of Health and Human Services California Department of Insurance National Association of Insurance Commissioners
California Department of Managed Health Care
An individual who assists consumers with enrollment into the programs administered by the California Health Benefit Exchange is known as a(n)? Accident and health insurance broker Accident and health insurance agent Certified insurance agent Health insurance analyst
Certified insurance agent
All of the following are components of a life insurance policy premium EXCEPT:
Dividends Explanation: To calculate a life insurance premium, the insurer adds up their expenses, including the cost of death (mortality) and other expenses (such as commissions and reinsurance), then they subtract investment income that is generated from investing their insured's unearned premiums. Dividends are not a component of premium calculation, since they are not an expense of the company. Remember, dividends are not guaranteed, and if paid, are considered to be a return of an overpayment, which is why they are not taxable.
A condition that could result in a loss is known as a: Risk Hazard Peril Exposure
Exposure Explanation: An exposure is a condition that could result in a loss. A peril is a cause of loss. Risk is the chance of loss and a hazard is something that increases the risk.
Which of the following is considered ordinary insurance? Whole life insurance Blanket policies Renewable term insurance Mortgage redemption
Mortgage redemption Feedback Mortgage redemption must be ordinary or individual insurance, while whole life and term can be group or individual. Blanket insurance is group insurance.
All of the following statements about policy provisions are true, except: The automatic premium loan can keep a policy in force when payments are missed and there is sufficient cash value to pay the premium. Suicide during the policy's first two years results in policy rescission. The insuring clause states the insurer's promise to pay a death benefit if premiums are paid, and proof of death is received. Death during the grace period results in a full death benefit being paid.
Death during the grace period results in a full death benefit being paid. Feedback The missed premium will be deducted from the full death benefit if death occurs during the grace period.
All of these statements about life insurance settlement options are false, except: Life income payments are income tax free. Settlement options like fixed period are good ways to provide an income to a beneficiary who cannot handle large sums of money. Life income with 10 years certain provides at least 120 months of payments. Fixed amount is the default option when no option is selected.
Life income with 10 years certain provides at least 120 months of payments Feedback "Lump sum" is the default option. Life settlement options are good for those who cannot handle large sums of money, but the interest portion of each payment is taxable income. Only the face amount or lump sum amount is tax free.
A person who, for a fee paid by any person other than an insurer, advises any person insured under, named as beneficiary of, or having any interest in, a life or disability insurance contract, in any manner concerning that contract must be licensed as a: Life and accident and health solicitor Life insurance broker Life only agent Life and disability insurance analyst
Life and disability insurance analyst Explanation: A life and disability insurance analyst sells advice for a fee, which may be paid by any person other than an insurer.
Concerning qualified plans, which statement is false? Defined benefit and defined contribution plans have different penalties for early distribution. Defined benefit plans are often linked to an employee's years of service. Profit-sharing plans allow employees to share in the employer's success. ESOP's invest in a portfolio of stock selected by the employer.
ESOP's invest in a portfolio of stock selected by the employer. Feedback ESOP's invest in the employer's stock.
All of the following are characteristics of the social insurance program known as Social Security, except: Fully insured status can be achieved by paying the FICA tax for forty quarters/credits. Retirement age is based upon the worker's birth year. The worker's full retirement benefits are determined by the PIA. Full retirement age is 65 for all persons born after 1937.
Full retirement age is 65 for all persons born after 1937.
All of the following describe differences between binding receipts and conditional receipts, except: The conditional receipt can provide coverage from the date of application once the application is later approved by underwriting No claim is paid with either receipt until a policy is issued The binding receipt always provides immediate coverage from the date of the receipt Conditional receipts are commonly used for life insurance applications.
No claim is paid with either receipt until a policy is issued Feedback Under a binding receipt a claim would be paid even if the policy was not issued yet. Binding receipts tend to be used for property insurance.
What nonforfeiture option allows a policyowner to use the existing cash value to purchase a policy of the same face amount as the original policy but for a reduced amount of time? Cash surrender value Extended term insurance Reduced paid-up insurance Extended paid-up insurance
Extended term insurance Feedback The nonforfeiture option that results in a paid-up policy with the same face amount as the original policy is the "Extended Term" option.
Which of the following becomes part of the contract, is guaranteed to be true, and if untrue, may be grounds for rescinding the policy? Contract of adhesion Facility of payment clause Warranty Consideration
Warranty Feedback A warranty must be literally true. A violation of a material warranty permits the other party to rescind the contract.
Which insurance is known for having a level premium with a fixed rate of return resulting in guaranteed cash value? Whole Life Adjustable Life Universal Life Variable Life
Whole Life Feedback Because whole life has a level premium and a fixed rate of return, the resulting cash value is predictable.
An applicant has the right to know that the insurance company will collect certain personal information about their credit, character and reputation. The insurer may gain such information from: An application for insurance. A pretext interview. A consumer report. A privacy notice.
A consumer report. Feedback A consumer report includes information about a potential client's credit, character and reputation. This report may be obtained by the insurer during the underwriting process.
What is not likely to happen with a return of premium policy? The total premiums paid are added to the death benefit. The total premiums paid is returned to the insured when the policy is cancelled. Increasing term insurance is use to provide this additional benefit. These policies typically have a higher premium than policies without this feature.
The total premiums paid is returned to the insured when the policy is cancelled Feedback This benefit is payable to policy maturity.
All of the following are true regarding an insurance solicitor EXCEPT:
They must be appointed by an admitted insurer Explanation: Solicitors are appointed by the P&C agents or brokers they represent, not by an insurer.
The definition of mortality and morbidity: They are virtually the same concept. Odds of sickness versus odds of disability. Odds of dying versus the odds of disability. Odds of sickness versus the odds of dying.
Odds of dying versus the odds of disability. Feedback Mortal related to death, while morbid relates to illness/disability.
Brian purchased a variable life policy and died 25 months after the issue date. It is then discovered that Brian understated his age on the application. What will the insurer do in regard to the payment of the death benefit to the beneficiary? The death benefit will be reduced to reflect the age discrepancy. The full death benefit will be paid because the policy is over 2 years old. The policy will be rescinded and all premium paid will be refunded to the beneficiary. The death benefit will be paid to the estate of the insured for legal action.
The death benefit will be reduced to reflect the age discrepancy.
A licensed life agent may transmit an application for insurance to an insurer for which the life agent is not appointed. If the insurer issues the policy, the insurer is considered to have authorized the agent to act on its behalf, and they must forward a notice of appointment to the Commissioner within ____ days after receiving the application. 21 days 30 days 14 days 7 days
14 Explanation: A licensed life agent may transmit an application for insurance to an insurer for which the life agent is not appointed. If the insurer issues the policy, the insurer is considered to have authorized the agent to act on its behalf, and the insurer shall forward a notice of appointment to the Commissioner within 14 days.
All of the following are true regarding participating life insurance policies issued by mutual insurers EXCEPT:
Dividends are guaranteed to be paid if the insurer makes a profit Explanation: On participating life insurance policies, the payment of dividends to the policyholders is at the discretion of the board of directors of the insurer. Remember, dividends may never be guaranteed and the insurer does not have to pay them, whether they make a profit or not.
All of the following statements about life insurance policy illustrations and the senior market are correct, except: The illustration will note that both guaranteed and non-guaranteed elements will remain unchanged for the years illustrated. Illustrations must note that they are only an illustration. To be understandable, policy illustrations must follow certain formats so the insured can make informed buying decisions. Guaranteed elements must be emphasized in bold print.
Guaranteed elements must be emphasized in bold print. Feedback Non-guaranteed elements will change over time. Guaranteed elements show the minimum, guaranteed performance that will occur
All of the following are dividend options, except: Reduce the nest premium payment Interest only option Accumulate with interest One-year term option
Interest only option Feedback "Interest only" is a settlement option, not a dividend option.
Which of the following is not excluded from the California Life and Annuity Replacement Law? Purchasing a new policy that will take the place of an existing policy Purchasing credit life insurance for the purchase of a second home Converting a convertible term policy to whole life insurance Purchasing credit life insurance for the purchase of a second home
Purchasing a new policy that will take the place of an existing policy Feedback Any transaction in which a client purchases a new policy with the intention of cancelling an existing policy is considered to be a replacement transaction.
An applicant for an insurance license has had a previous application for a professional license denied for cause within the last five years. The insurance commissioner will: Accept the application for a two year provisional license. Deny the application without hearing. Accept or deny the application after an exploratory hearing. Accept the application as other licenses have no bearing on this application.
Deny the application without hearing. Feedback The loss of a professional license, or the previous denial of an application for a license, within five years of the submission of the current application will result in the application being denied without a hearing.
All of the following statements about survivorship life are true, except: The face amount is payable after the first death. The face amounts are often for $1,000,000 or more. They are particularly well suited to help families deal with estate tax burdens. As a form of joint life, it covers two individuals on the same policy.
The face amount is payable after the first death Feedback Survivorship life, sometimes referred to as "second-to-die" joint life, insures two people on the same policy, but pays the death benefit only after the second insured dies.
All of the following are true regarding an insurance broker EXCEPT:
They transact insurance other than property & casualty Explanation: There are no life and health insurance brokers, although life and health agents are permitted to engage in "brokerage."
The term aleatory is best defined by which of the following? Unequal exchange in value. Both parties to the contract are required to disclose to the other all material information. Only one party to the contract is bound by a legally enforceable obligation. If in dispute, the courts rule in favor of the insured, not the insurer.
Unequal exchange in value Feedback Insurance is designed so that those who don't make claims help pay for those who do make claims. Thus, it is possible that a policyholder could pay a small amount of premium before the insured dies, and the beneficiary would receive a large death benefit.
Premiums paid into a variable annuity purchase which of the following? Paid-up units Purchased units Annuity units Accumulation units
Accumulation units Feedback Variable annuity premiums purchase accumulation units during the accumulation period.
According to the California Insurance Code, what information is the agent required to include on their business card? Identification of their relationship to the insurance company. Must not include any title, designations, or licenses that are not currently held. All of the above. License number must appear in the same size font as the phone number.
All of the above Feedback There are many rules related to business cards on full disclosure, clear communications, and proper identification of agent and insurer.
Sam has a $200,000 convertible life insurance policy. If he chooses, he can: A. Convert to another term policy with a lower face amount without proof of insurability. Convert to a whole life policy for the same face amount without proof of insurability. Purchase an individual annuity for any face amount using the 1035 exchange privilege. Purchase another term policy and increase his death benefit without proof of insurability.
Convert to a whole life policy for the same face amount without proof of insurability Feedback Conversion allows a term policy to be changed into a cash value policy (often whole life). While the premium will increase for the same amount of death benefit, no evidence of insurability is required.
Agent Darren offers life insurance for no cost to people buying property in a local development. When the Commissioner investigates his actions, which of the following is not a likely consequence? A cease and desist order will be issued. Darren will be charged with a felony and/or up to 10 years in jail. A hearing will be called. A civil penalty of up to $5,000 if his actions were not willful and $10,000 fine they were.
Darren will be charged with a felony and/or up to 10 years in jail Feedback Violations of the Unfair Practices Act customarily result in a hearing, a fine, and a cease and desist order.
Which of the following characteristics would not stop an insurance company from accepting an insurance risk? The item to be insured: Faces high catastrophic loss exposure Is part of a large group of homogeneous exposure units Holds no hardship to the owner should it be lost or damaged Has a market value difficult to determine
Is part of a large group of homogeneous exposure units Feedback Insurance companies prefer insured's that are part of a large group with similar risks so they can understand the scope of the risk, and charge the appropriate premium.
Variable insurance and variable annuity products are regulated by: DOI and FINRA. SEC and FINRA. SEC, FINRA and DOI. None of the above.
SEC, FINRA and DOI Feedback Variable products are governed at the national level by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), and at the state level by the Department of Insurance (DOI).
In contrasting stock insurers with mutual insurers, which statement is not false? Stock insurers are owned by the shareholders, and issue non-participating policies. Non-participating policies can pay out dividends to the policyholders. Mutual insurers are owned by the shareholders, and issue participating policies. Stock dividends are tax-free while policy dividends are taxable.
Stock insurers are owned by the shareholders, and issue non-participating policies Feedback Stock insurers are owned by their shareholders/stockholders. Their policies are labeled non-participating since the clients do not share in the divisible surplus (dividends).
Under the Internal Revenue Code section 1035, all of the following life insurance exchanges are tax deferred EXCEPT: The exchange of an annuity for a life insurance policy The exchange of life insurance for an annuity The exchange of a life insurance policy for another life insurance policy The exchange of an annuity for another annuity
The exchange of an annuity for a life insurance policy Explanation: Under the Internal Revenue Code section 1035, if a policyowner takes cash surrender but uses the money to purchase a new policy, they may be able to defer taxes on the accumulated interest by making a 1035 exchange which allows a life policy to be exchanged for another life policy or annuity and an annuity to be exchanged for another annuity. However, annuities may not be exchanged for life insurance, since that would put the customer in a better overall tax position upon death.
In which type of policy does the insurer apply flexible premium to pay for the cost of insurance and expenses and then uses the remaining balance plus interest to build the cash value account? Whole life Renewable term Adjustable life Universal life
Universal life Feedback Universal life insurance is also known as "flexible premium" The calculation for gross premium is: Mortality risk - Interest + Expense, any remaining premium will be applied to cash value.
A policy illustration may not include: An interest rate for non-guaranteed elements that is less than the earned interest rate of the disciplined current scale. Depictions of policy performance being less favorable than the insurer's illustrated scale. Vanishing premiums if the policy becomes paid up with non-guaranteed elements paying future premiums. The name of the insurer, the name of the client, and the name of the producer.
Vanishing premiums if the policy becomes paid up with non-guaranteed elements paying future premiums Feedback The term "vanishing premiums" can only be used if they are based on guaranteed elements.
Which of the following can be written as a group policy? Credit life Endowment at 65 Survivorship life Life paid-up at 65
Credit life Feedback All of the above can be written as ordinary, or individual, policies. Only credit life can also be written as a group policy.
All of the following are true regarding key person life insurance EXCEPT: The key person is the insured Death benefits are taxable The employer is both the policyholder and the beneficiary Premiums are not tax deductible
Death benefits are taxable Explanation: Key person life insurance utilizes an individual life insurance policy for a business purpose. On a key person life policy, the employer is both the policyowner and the beneficiary and the key person is the insured. Although the premiums paid by the employer are not tax deductible, the proceeds payable upon the death of the key person are not taxable to the employer, who would use them to hire and train a replacement.
A non-taxable refund of premium that may be returned to a policyowner by an insurance company under a participating life insurance policy is known as a:
Dividend Explanation: Dividends paid out to policyholders of a mutual insurer are not taxable since they are treated as a return of a premium overpayment. Remember, insurance premiums are paid with after tax dollars, so a dividend is simply a return of money that the policyholder has already paid tax on.
When recommending to a senior consumer an annuity purchase or the exchange of an annuity that results in another insurance transaction, a producer must have reasonable grounds for believing that the recommendation is: Suitable Reasonable Profitable Appropriate
Suitable Explanation: California regulations require insurers to establish a system to supervise recommendations and set forth the suitability standards and procedures for recommendations to senior consumers that result in the sale of annuities so that their insurance needs and financial objectives at the time of the transaction are appropriately addressed.
A life-only agent issues a binding receipt to his client since the client did include a check for the initial premium with his completed application. Which is true? The client is not covered during underwriting since binders only start once underwriting is complete. The agent faces potential suspension or revocation of their license. Since the medical exam hasn't been completed yet, the client is not covered at all. The client is covered during underwriting.
The agent faces potential suspension or revocation of their license Feedback Binding receipt gives immediate coverage in the field of property insurance. Issuing a binding receipt to a life client could result in license suspension for jeopardizing and misleading the client. Life only agents do not have authority to issue binding receipts.
Mrs. Anderson need to invest the proceeds from her late husband's life insurance. She invests a portion of the money into an annuity. Since she is 62, and is still working, she decides to purchase a single premium deferred annuity. She won' t need an income for a few more years. What should the agent make sure Mrs. Anderson understands? Since she only has a few more years before she retires, she should invest with the objective tho make as much money as possible. Her time horizon is limited. She will have to begin taking withdrawals within six months of receiving the proceeds. She has a 30 day free look period in case she changes her mind. As a life insurance product, future proceeds are tax free.
She has a 30 day free look period in case she changes her mind. Feedback As someone who is 60+, she gets the 30-day free-look period, and should
Who submits a request for life insurance to a company? The underwriter The beneficiary The applicant The agent
The applicant Feedback While the agent often handles the paperwork; it's the applicant who is technically requesting life insurance coverage.
Which statement about life insurance code and ethics is not true? The act of twisting could result in a license suspension for up to three years Marketing plans to offer free insurance as an inducement to buy or rent real property are prohibited Agents are not permitted to advertise that an insurer is a member of any insurance guaranty association Acts of fair and unfair discrimination are prohibited
Acts of fair and unfair discrimination are prohibited Feedback Acts of fair discrimination such as charging older clients a higher premium are legal.
Which of the following would not be considered a speculative risk? All of the above situations involve some risk. Your client invest 5% of his salary into the defined benefit plan at his work. Any action that could do harm to your clients well-being such as reckless driving. Every week your client plays $20 on the lotto.
Any action that could do harm to your clients well-being such as reckless driving.
Which of the following statements is not included in the Entire Contract clause? Insurer agrees to provide life insurance protection for the named insured which will be paid to a designated beneficiary when proof of death is received by the insurer. A copy of the application, if used, must be attached to the policy. Only an executive officer can make changes to the contract. All statements made by the insured in the application will be considered as representations, not warranties.
Insurer agrees to provide life insurance protection for the named insured which will be paid to a designated beneficiary when proof of death is received by the insurer Feedback This describes the Insuring clause.
Candee owns a participating whole life policy and uses her policy dividends to buy more of the same type of coverage for herself. Candee has chosen the: One-year term option Paid-up additions option Accumulated at interest option Reduced paid up option
Paid-up additions option Feedback Paid-up additions are of the same type of insurance as the base plan.
A cause of loss is also known as a(n): Peril Risk Hazard Exposure
Peril Explanation: Risk is defined as the chance of loss. A hazard is something that increases the risk. A peril is a cause of loss, such as accident or sickness. An exposure is a condition that could result in a loss.
Under the cost of living adjustment rider, the policy: Will see an increase in its face value each year by a set percentage. Will only increase with the inflation rate. There will be an additional premium charged, but no evidence of insurability is required. Will allow the insured to purchase additional insurance with evidence of insurability. Will increase or decrease along with the CPI. The premium will adjust accordingly. No evidence of insurability is required.
Will only increase with the inflation rate. There will be an additional premium charged, but no evidence of insurability is required Feedback The COLA rider is tied to an inflation index, which permits the death benefit to increase periodically to offset the effects of inflation. The face amount will not decrease in times of deflation.
How does the IRS classify the two different types of retirement accounts? Qualified and unfunded Fully funded and non-qualified Qualified and non-qualified Contributory and noncontributory
Qualified and non-qualified Feedback "Qualified" means a plan meets certain IRS guidelines so it receives beneficial tax treatment, such as tax deferred. "Non-Qualified" means it does not meet those guidelines, and therefore doe not receive beneficial tax treatment.
Tommy Greene has a CLU certification. Which of th following names would automatically approve for use as his agency's name? Greene Insurance Agency Tommy Greene and Associates None of the would ever be automatically approved Thomas Greene, CLU, & Company
None of the would ever be automatically approved Feedback No name is ever automatically approved for licensee use. There are always procedures and background checks to administer.
While collecting underwriting information, certain rules must be followed. Which of the following is incorrect? Insurers may test for HIV after getting informed consent from the applicant, and may ask questions concerning the existence of the condition as long as they don't reveal information about sexual orientation. When credit is used to determine insurability, the applicant must be furnished with the name, address, and phone number of the credit agency used by the insurer. Post-claims underwriting is a valid and necessary means of determining the insurability of a potential applicant. Information contained on the non-medical application may result in the requirement for a physical exam.
Post-claims underwriting is a valid and necessary means of determining the insurability of a potential applicant Feedback Post-claims underwriting is a prohibited process in disability insurance. All underwriting must be completed prior to issuing the policy; it is illegal to do more underwriting after a claim has been filed.
The Roth and Traditional IRAs have some similarities. Which of the following is not true? Both allow the investor to invest for themselves and their non-income earning spouse Both grow tax deferred Both have penalties for early withdrawal Both are tax deductible to the investor
Both are tax deductible to the investor Feedback The Roth has non-deductible contributions, while the Traditional IRA allows tax deductible contributions.
The insured dies 6 months after the policy issue date. Upon death of the insured, it is determined that the applicant made a material misstatement on the application. What is the most likely course of action for the insurer? An administrative hearing by the DOI A hearing by a court of law to determine the appropriate actions No course of action allowed since the policy has already been issued Rescind the policy
Rescind the policy Feedback The contestability period is still in force so the policy can be rescinded by the company for material misrepresentation on the application.
An employee has lost access to their group term life insurance plan, but they are allowed to convert to a new plan. Which best describes this new plan? The new policy will be cash value. The employee pays all the premiums. The new policy will be term life. The employee pays all premiums. The new policy will be cash value. The employer will pay a portion of the cost. The new policy will be term life. The employer will pay a portion of the cost.
The new policy will be cash value. The employee pays all the premiums. Feedback Conversion from group to individual can be any insurance except term. The insured who lost their coverage is now paying the entire premium.
Which statement about reinstatement is false? The reinstated policy is incontestable if the first time it was in force it already passed the two year mark. A reinstated policy's premium is based upon the insured's original age. Reinstatement usually requires an application with underwriting questions, but may not require any physical exams. Reinstatement requires payment of past due premium plus interest.
The reinstated policy is incontestable if the first time it was in force it already passed the two year mark Feedback A reinstated policy will be contestable again for another two years.
On June 1, 2000, a client purchased a whole life policy with a face amount of $100,000 and an annual premium of $1,000. If the client died on July 4, 2015 without paying the annual premium due on June 1, how much will the insurer pay to the beneficiary? $100,000 The cash value $99,000 Nothing
$100,000 Explanation: A whole life policy is required to have a cash value after it has been in force for three (3) full years. Although this policy lapsed for nonpayment of premium at the end of its 31-day grace period, if the insured died without selecting a nonforfeiture option, the insurer is required to use the cash value to purchase extended term life insurance coverage for the insured with the same face amount as their lapsed policy had, which in this case was $100,000
In a non-contributory group policy: 75% of eligible employees must elect to join the plan. 100% of employees must be allowed to participate. 75% of employees must elect to join the plan. 100% of eligible employees must participate.
100% of eligible employees must participate. Feedback In a non-contributory plan, the employer pays all of the premium, so they must cover all eligible employees.
Which statement best describes "agreement" as it relates to contracts? Each party must offer something of value. The intent of the contract must be legally acceptable to both parties. One party accepts the exact terms of the other party's offer. All parties must be capable of entering into a contract.
One party accepts the exact terms of the other party's offer. Feedback Agreement includes both an offer and its acceptance.
All of the following are non-forfeiture options contained in a cash value life insurance policy EXCEPT: Reduced paid-up Extended term Paid-up additions Cash surrender
Paid-up additions Explanation: Be sure to know and understand the three non-forfeiture options that are designed to protect a customer's cash value upon policy lapse. Paid-up additions are not a non-forfeiture option, they are a dividend option.
A false representation on a signed claim form may subject the insured to _________.
Perjury Explanation: A false representation made on a signed claim form may subject the insured to perjury.
Upon the death of a primary breadwinner who is fully insured under Social Security, a dependent child is eligible to receive an income benefit until the age of 22 or 23, if unmarried and a college student 18 or 19, if unmarried and a student in elementary or secondary school 18 19
18 or 19, if unmarried and a student in elementary or secondary school Feedback Under Social Security the unmarried children of a "fully insured" deceased worker will receive benefits until 18, or 19 if still in elementary or secondary school.
Which of the following statements about a resident life-only agent licensing is incorrect? Loss of a precious professional license could result in the automatic denial of the life-only license application Licensees are required to have an in-state residential address A licensee has 30 days to update a change in address A plea of nolo contendere is considered a conviction, thus it could hinder attempts to obtain a life-only license
A licensee has 30 days to update a change in address Feedback Changes of address must be filed immediately.
Which rider pays a multiple of the original face amount? Accelerated Death Benefit Accidental Death and Dismemberment Accidental Death Benefit Cost of Living
Accidental Death Benefit Feedback Also known as "double indemnity," accident riders pay a larger death benefit if the death is due to accidental means.
The entire contract can include many components. Which of the following cannot be a part of the entire contract. A copy of the application Any document referenced by the policy Any riders The policy
Any document referenced by the policy Feedback The entire contract cannot reference any "outside" documents.
California rules for annuity sales require all agents to present a specific disclosure document in advance to any senior citizen who is not already a client whenever a sales appointment will be conducted in the person's home. How far in advance must the prospect receive the written notice? At least 24 hours Three calendar days Prior to entering the home One business day
At least 24 hour Feedback This rule is designed to protect seniors. It is written as "at least 24 hours" in advance of the first meeting in the client's home.
In order to be financially solvent, an insurer must accomplish all of the following, except: A. Maintain an amount at least equal to its required minimum paid-in capital. B. Reinsure any risk in excess of state retention limits. C. Possess enough assets to cover its liabilities. D. Contribute a specific amount of capital reserves to the state.
Contribute a specific amount of capital reserves to the state. Feedback Reserves are retained by the insurer to pay future claims; they are not paid to the state.
An insurer invests the cash value of a fixed annuity in which of the following assets? Index account General account Blended account Separate account
General account Feedback An insurer guarantees the cash value in a fixed product and therefore assumes the risk of the investment. Money in fixed products is held in the general account which is invested in relatively safe and low risk instruments such as bonds, mortgages, and real estate.
The provision that protects the proceeds of a life insurance policy from attachment by the beneficiary's creditors after the insured's death is known as the: The Beneficiary Protection Clause. Spendthrift (Trust) Clause. Incontestability Clause. Common Disaster Clause.
Spendthrift (Trust) Clause Feedback The "Spendthrift Clause" keeps the beneficiary's creditors from attaching the death benefit while held by the insurance company
All of the following are true regarding the waiver of premium rider when it is attached to a whole life insurance policy EXCEPT: An additional premium is charged It usually drops off the policy when the insured turns age 65 The amount of the waived premium due is treated as a policy loan Premiums are waived after the insured has been disabled for 6 months
The amount of the waived premium due is treated as a policy loan Explanation: The waiver of premium rider is actually a type of credit disability insurance that is added to a life insurance policy for an additional premium charge. If the insured is disabled for more than six months, the rider will pay the insured's premium until they either recover or die. Since the premium is being paid by the rider, the cash value in the policy will continue to accumulate as if the insured was paying the premium themselves. If the insured does not become disabled, the rider will usually drop off the policy at age 65 and the overall policy premium will be reduced.
If an applicant for life insurance misstated their age on their application and dies five (5) years later:
The death benefit will be adjusted to what the premium paid would have purchased if the correct age was known Explanation: Although a life insurance policy is incontestable after it has been in force for two years, the misstatement of age clause goes on indefinitely. Although a claim may never be denied for misstatement of age, the amount payable to the beneficiary may be adjusted to reflect how much coverage the premium paid by the insured would have purchased if the correct age was known.
Which of the following statements is false in regard to a Life Paid-up at-65 whole life policy? The policy will endow at age 65. The policy will mature at the death of the insured or age 100, whichever occurs first. Premium payments stop at age 65. Premium payments will be higher than a straight whole life policy.
The policy will endow at age 65. Feedback Limited pay policies limit the length of time for premium payment, all other features remain the same, such as length of coverage, maturity, and endowment. Because the number of premium payments is reduced in a limited pay policy, the premium must be higher than straight life.
After the insured passes away, it is discovered that the policy was rated based upon an incorrect age. The client lied about their age when filling out the application 8 years earlier. What effect will this have on the benefit? The policy will be rescinded as it is contestable. The policy is incontestable. Full claim will be paid. The shortage of premium will be deducted from the death benefit. The proceeds payable will be adjusted.
The proceeds payable will be adjusted. Feedback When the age is misstated on the application, the death benefit paid will be adjusted to reflect the correct age.
Which of the following cannot be used in a policy illustration if nonguaranteed elements are intended to pay future premiums? Paid-up premiums Paid up additions Vanishing premiums Disappearing premiums
Vanishing premiums Feedback This is true about policy illustrations according to the California Insurance Code.