Insurance Final

What does a 401(k) plan generally provide its participants?

salary-deferral option

An owner's cost basis for a non-qualified deferred annuity is typically the same as the

total premiums paid into the annuity

a hold-harmless clause is an example of risk

transfer

life settlement proceeds may be subject to the claims of

creditors

Death proceeds from a life insurance policy are typically included in a deceased insured's gross estate for

for federal income tax reasons

Which of the following is NOT considered to be an expense for surviving family members of a deceased wage earner? Estate taxes Unemployment tax expenses Funeral expense Living expenses

Unemployment tax expenses

How do benefit payments fluctuate over time in a variable life annuity? Benefit payments stay fixed Reflects changes in the market value of assets in a separate account Annuitant controls any benefit payment changes Any benefit payment fluctuations have to be approved in writing by the owner

Reflects changes in the market value of assets in a separate account

Which event triggers a deferred annuity to start making benefit payments to the annuitant?

When the contract is annuitized

Security laws passed by Congress are enforced by which Federal agency?

Security and Exchange Commission (SEC)

which of the following outlines the authority given to the producer on behalf on the insurer?

producer contract

An example of rebating would be

splitting the commission with they buyer on a sale of insurance

When the disclosure of an insured's nonpublic information is involved, what is the insurer obligated to do?

Give notice, explain, and allow opting out

A large corporation purchases an accumulation annuity contract where all of the participating employees receive certificates of participation. What is this contract called? 403(b) plan Group deferred annuity Group immediate annuity Joint and survivor group plan

Group deferred annuity

What is the best way to define life insurance replacement?

A transaction in which a new life insurance policy is purchased and an existing life insurance policy is surrendered.

A life annuity with period certain is characterized as

guaranteeing benefit payments for a stated minimum number of years

A producer's license may only be suspended or revoked if the producer

has been afforded the right to a hearing

Where will a life insurance policy's proceeds be directed to if all the beneficiaries die before the insured?

insured's estate

Which statement regarding the life insurance premium for a children's rider is true?

Premium remains the same no matter how many children

The automatic premium loan provision can be accurately described as a

provision that provides a policy loan to pay any premiums by the end of the grace period.

Statement made by an insured on an accident and health insurance application are considered to be

representations

Which of these statements regarding insurance is false? a. As the number of insured units increases, the number of losses decreases b. one way insurers deal with catastrophic loss in through reinsurance c. speculative risk cannot be insured d. pure risk can be insured

a. As the number of insured units increases, the number of losses decreases

Under which circumstance is the interest rate guaranteed within a market value adjusted annuity? a. When the contract has been held for a stated time period b. For the entire length of the contract c. Never d. When the cash value has reached a stated minimum amount

a. When the contract has been held for a stated time period

An agent's authority to bind an insurer to an insurance contract may be granted in the a. agent's contract and the insurance company's appointment b. agent's license and insurance company's certificate of authority c. buyer's guide

agent's contract and the insurance company's appointment

An _____ insurer operates in the U.S. but headquartered outside the U.S.

alien

A single-life annuity only has ONE

annuitant

if replacement was involved in the sale of a life insurance policy, a producer must provide a replacement notice no later than the

application date

The Age Discrimination in Employment Act provides protection for employment discrimination beginning at age

40

What is the excise tax rate the IRS imposes on individuals aged 70 1/2 or older who do not take the required minimum distributions from their qualified retirement plan?

50%

how long can an insurer legally defer paying the cash value of a surrendered life insurance policy?

6 months

According to ERISA regulations, a Summary Plan Description must be provided to a new plan member within ___ days of the member's eligibility date.

90

Which of the following combinations best describe a universal life insurance policy? A mutual fund and an endowment policy A term insurance policy and a whole life policy A modified endowment policy and an annual term insurance policy A flexible premium deposit fund and a monthly renewable term insurance policy

A flexible premium deposit fund and a monthly renewable term insurance policy

Which one of these is NOT considered to be an element of an Insurable risk? A. Speculative risk B. Pure risk C. Loss cannot be catastrophic D. Loss must be due to chance

A. Speculative risk

Which benefit is normally payable to a life insurance policyowner when the insured's life expectancy has been severely limited?

Accelerated (living) benefit

What is the reason that insurance companies require a minimum number of employees participating in a group insurance plan? Efficiency is maximized Adverse selection is minimized Profits are maximized Claims are minimized

Adverse selection is minimized

Which provision makes the application part of the annuity contract?

Entire Contract clause

Death benefits from a life insurance policy are normally considered to be

Exempt from federal income tax

A policyowner fell behind on the premium payments of a whole life policy, and it is now in the grace period. How much will the beneficiary receive if the insured dies during this grace period and the policy also contains an outstanding policy loan?

Face amount minus the loan balance and past-due premium

a consumer who has been recently denied insurance, credit or unemployment based on an unfavorable consumer report must be advised as such. which of the following does this statute originate from?

Fair Credit Reporting Act

Which tax cost is normally associated with death?

Federal estate tax

Which life insurance settlement option pays a stated monthly benefit until both principal and interest are exhausted?

Fixed amount installment option.

What is an insurance contract that identifies individuals by relationship to a specific organization?

Group insurance.

What is the name of the rider that provides an additional purchase option in a life insurance policy?

Guaranteed insurability rider

What is another name for a Keogh plan?

HR 10 plan

When compared to a fixed annuity, a variable annuity has what distinguishing feature? a. Flexible premiums according to a stock index b. Investment risk is assumed by the policyowner c. Investment risk is assumed by the insurer d. Payout option can be changed after the accumulation phase

Investment risk is assumed by the policyowner

In what way are insurance policies said to be aleatory?

Involves the potential for the unequal exchange in value

The initial premium for a life insurance policy is typically paid in what way?

It is typically obtained by the producer and forwarded to the insurer

Use of XYZ Insurance Company brochures, business cards, and rating guides is an example of

Apparent authority

in an individual retirement account(IRA), rollover contributions are

Unlimited by dollar amount

the main purpose of an annuity is to

create a stream of income

First-time homebuyers are able to withdraw up to how much from their qualified IRAs without incurring the 10% early withdrawal penalty?

$10,000

the free look period provided in a life insurance policy is usually

10 days

A "premature" distribution from a modified endowment contract (MEC) incurs a penalty tax of

10%

In NH, the Age Discrimination in Employment Act rules to apply to employer groups with at least

15 or more employees

The maximum prison sentence given under federal law for unfair and deceptive insurance practices.

15 years

In NH, temporary producer license may be issued for a period not to exceed __ days.

180

A life insurance policy that is paid annually must contain a grace period of at least ___ days.

30

Which type of life insurance policy is best suited for paying off the outstanding balance of a 30-year mortgage in the event of the insured's death?

30-year decreasing term

A terminated employee has how many days upon termination to convert group life insurance coverage to an individual policy?

31

What is a juvenile life insurance policy?

A life policy that covers the life of a minor

Which of the following situations would allow funds to be deposited into a rollover IRA? a. an individual receives a $100,000 inheritance b. a family receives $1,000,000 in a wrongful death lawsuit c. An employee quits her job and receives $50,000 from her qualified plan

An employee quits her job and receives $50,000 from her qualified plan

Which type of policy can group term life insurance normally be converted to?

An individual permanent life insurance policy.

In what situation could an insurance policy's coverage be modified?

Applicant is a substandard risk

Which of these policies is considered a whole life policy? A. Credit life B. Single premium life C. Renewable life D. Convertible life

B. Single premium life

An insurance policy may be issued with a preferred insurance premium in all of these situations EXCEPT A. good credit history B. living in a rural area C. good health history D. being a nonsmoker

B. living in a rural area

An annuitant is paid $495 per month until the contract value is exhausted at some undetermined date in the future. Which type of annuity payout option is this?

Fixed amount

What type of life insurance policy covers two or more persons and pays the face amount upon the death of the first insured?

Joint life

Laura added a children's rider to her life insurance policy. What type of coverage was added?

Level term

A life policy's spendthrift clause would have no effect if the beneficiary is paid the proceeds as a

Lump-sum payment

The beneficiary of a life insurance policy is normally selected by whom?

Policyowner

If a producer chooses to conduct business under an assumed name, when must notification be given to the Commissioner?

Prior to using the assumed name

When a producer submits an application that discloses personal information regarding the applicant, who supplies the privacy notice?

Producer

Which of these occurrences could improve an insurer's ability to reduce premiums?

Rate of earnings on investments increase.

What could be the potential result of taking out a cash value loan under a life insurance policy?

Reduces the amount receivable upon surrender of the contract.

What would be considered an advantage of purchasing term life insurance? a. Cash value can be borrowed against b. The coverage is permanent c. Nonforfeiture values are available d. The initial premium is lower compared to the same amount of whole life coverage

The initial premium is lower compared to the same amount of whole life coverage

Which of these statements regarding the extended term insurance nonforfeiture option in a life policy is accurate?

The premium to purchase the coverage comes from the policy's cash value

Which of these is NOT a reason to buy a term life policy? To pay a mortgage balance if an insured dies To offer temporary protection To offer low-cost insurance coverage To accumulate savings

To accumulate savings

What is the effect of the market value adjustment in a market value adjustment annuity?

Transfers some of the investment risk to the policyowner.

How is a collateral assignment used in a life insurance contract?

Transfers specific ownership rights to a creditor

What is the face amount of a $50,000 graded death benefit life insurance policy when the policy is issued? $0 $50,000 Under $50,000 initially, but decreases annually over time Under $50,000 initially, but increases annually until fully insured

Under $50,000 initially, but increases annually over time

In NH, if an individual engages in transacting insurance business and acts with the proper states license, this is considered

a Class A Misdeamnor

which of the following is an example of defamation

a producer who is publicly and erroneously announces that an insurance company is insolvent

An individual who purchases a modified life insurance policy expects A. a higher rate of return B. coverage for two people C. an improvement in future income D. a flexible face amount

an improvement in future income

In order to renew a producer's license, continuing education credits must be completed

bi-annually, every two years

Which of the following is NOT guaranteed in a whole life policy? a. settlement options b. nonforteiture options c. dividend scale d. policy loan values

c. dividend scale

An insurable risk requires a. that the chance for both a loss or gain exists b. the loss must be catastrophic c. that the chance of loss be calculable d. that the loss must be incalculable

c. that the chance of loss be calculable

Voluntarily terminating an insurance policy is also known as

cancellation

an order issued by the Commissioner that prohibits a specific practice listed in the order is called a

cease and desist order

Which of the these is NOT a true statement of the war exclusion? a. civil insurrections apply b. prevents an insurer's financial catastrophe c. typically applies to declared and undeclared wars d. war risk is typically uninsurable

civil insurrections apply

A prospective client was intimidated by a producers to purchase life insurance. The producer could be found guilty of

coercion

The courts will normally interpret a policy in favor of the insured when the meaning of the policy is not clear. This is because an insurance policy is a(n)

contract of adhesion

Which statement is INCORRECT concerning a tax-sheltered annuity (TSA)? a. Participants make payments from salary reductions b. Normally used by charitable, educational, and religious organizations c. Also known as 403(b) plans d. Annual investment gains are included in participant's gross income

d. Annual investment gains are included in participant's gross income

All of these are duties that a producer may be required to perform when delivering an insurance policy EXCEPT a. Acquire a statement of good health signature b. Gather the initial premium c. Review policy with applicant d. Leave a conditional receipt with client

d. Leave a conditional receipt with client

Scott has a life insurance policy in which the dividends are left with the insurance company. This particular policy may be paid up when the cash value plus accumulated dividends

equal the net single premium for the same face amount at the insured's attained age

an agreement is reached when an insurance contract is formed. which of the following is NOT considered to be an element of an agreement? a. meeting of the minds b. offer c. acceptance d. equity

equity

An appointed producer's implied authority is derived from

express authority

the death proceeds of a credit life insurance policy are typically paid to the

lender

What type of premiums are associated with individual mortgage protection life insurance policies?

level premiums

A life insurance policyowner has been diagnosed with a terminal illness. An agreement to sell the policy at a discount in order to pay the medical bill is called a

life settlement

Someone who is licensed to negotiate a life settlement contract is called a

life settlement broker

In NH, false advertising is an example of

misrepresentation

In NH, the HIV consent form

must disclose who will be receiving a copy of the test results

If a producer sells a life insurance policy without using an illustration (even though one is available from the insurer) under this circumstance, the applicant then

must sign a statement that no illustration was provided

Which of these is NOT used as selection criteria in the underwriting process of a life insurance application? credit report national origin age of applicant sex of applicant

national origin

A ____________ producer lives in an other state and transacts insurance in NH.

nonresident

An example of rebating would be

offering a client something of value not stated in the contract in exchange for their business

The authority to change the beneficiary in an individual annuity lies with the

owner

When a deferred annuity is surrendered, who must sign the authorization to do so?

owner

Who typically makes the purchase payments in an individual annuity?

owner

A Keogh plan is a

qualified retirement plan for the self employed

a life insurance policyowner sells her policy to a third party in a life settlement. under this transaction, the policyowner

receives an amount less than the policys death benefit

During an annuity's liquidation phase, the annuitant normally

receives benefit payments at regular intervals

A life insurance policyowner would like a dividend option that results in a limited current outlay of funds. Which dividend option would be chosen? paid up additions accumulation at interest 1 year term reduction of premium payment

reduction of premium payment

When a lapsed policy's premium has been paid current, it has the potential of being

reinstated

A life insurance policy's waiver of premium rider has the ability to

relieve the insured of premium payments following an initial waiting period after the insured becomes totally disabled

What happens to the cash value of a market value adjusted annuity if it's surrendered prior to the end of that stated guarantee period?

subject to market value adjustment

The interest paid during an annuity's payout period is considered nontaxable taxable as ordinary income taxable as capital gains tax-deductible

taxable as ordinary income

How are monthly life annuity benefit payments treated under a tax sheltered annuity (TSA)?

taxed as ordinary income in the year received

under which circumstances may an insurable interest exist between two individuals in absence of an economic interest

the are marriage partners

what is payable to the policyowner if a whole life policy is surrendered prior to its maturity date?

the cash value

Under the Law of Agency, the principal is considered to be

the insurer

the life and health insurance guaranty association fund protects an insured in the event of

the insurer's insolvency

All of these are considered features of whole life insurance EXCEPT A. Cash value accumulation B. Permanent coverage C. Initial premium is lower than for an equivalent amount of term insurance D. Policy loans are allowed

C. Initial premium is lower than for an equivalent amount of term insurance

Which of the following disability buy-sell agreements is best suited for businesses with a small number of partners? Split dollar plan Entity agreement Cross-purchase agreement Key person plan

Cross-purchase agreement

When determining the suitability of an annuity for a consumer, the insurance provider is obligated to

Make reasonable efforts to fit the annuity with the consumer's needs

How is the insured protected if a payor benefit rider is attached to the life insurance policy?

Premium payments are waived in the event the premium payor dies or becomes diabled

An insurer will typically assess a back-end load on a deferred annuity that is cancelled during the early contract years. What is this back-end load referred to as?

Surrender charge

Which of the following would NOT be appropriate for an immediate annuity? a. a lottery winner who opted for a lump-sum payment b. a parent saving for college c. a beneficiary collecting the face amount of a life insurance policy d. someone who just won a large settlement

b. a parent saving for college

which statement concerning an adjustable life insurance policy is FALSE? a. cash surrender is possible b. evidence of insurability is required when there is a change in premium c. combines term and permanent insurance into a single plan d. an extra premium paid allowable

b. evidence of insurability is required when there is a change in premium

What must be given to a life insurance applicant when the agent receives an application and the initial premium?

conditional receipt

which of these is not an underwriting responsibility of a life insurance agent? a. asking relevant questions concerning an applicant's avocations b. requesting an APR c. ordering an inspection report d. determining the final rate classification

d. determining the final rate classification

which of these may NOT be deducted from a premium payments or the cash value of a variable life insurance policy? a. mortality costs b. administrative charges c. investment management fees d. federal premium taxes

d. federal premium taxes

which of these statements is NOT true regarding a cash value loan against a life insurance policy? a. interest normally accrues on unpaid balances b. loan cannot exceed the policys cash value c. policy contract terms dictate the interest rate d. interest payment made by the policyowner are deductible

d. interest payment made by the policyowner are deductible

A qualified profit-sharing plan is designed to

distribute a portion of company earnings to its employees

An insured may be required to sign which document at policy delivery to ensure there has not been any adverse medical conditions since the time of the application?

good health statement

An annuity which starts paying monthly benefits within a month after issuance is called a(n)

immediate annuity

Wyatt is shopping for life insurance and is mainly concerned with the policy's death benefit. Which index should he be looking at when making comparisons?

net payment cost index

A life annuity feature which provides benefit payments for a minimum number of years, no matter when the annuitant dies, is called

period certain

What happens to a life insurance policy when the policy loan balance exceeds the cash value?

policy will no longer be in force

XYZ Corp gives money to an employee to purchase a life insurance policy and allows the employee to select the beneficiary. What kind of plan is this?

split-dollar

Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The widow qualifies for

the marital deduction

what happens when a policyowner borrows against the cash value of his life insurance policy?

the policy proceeds would be reduced by the oustanding loan balance

a material change in a modified endowment contract (MEC) results in

the seven pay test, adjusted for cash value, applies again

Every ___ years, a producers license in NH must be renewed.

two

When would evidence of insurability be required for a person already covered with a variable universal life policy?

when the death benefit is increased

Which life insurance policy would be eligible to include an automatic premium loan provision?

whole life

Which of the following types of insurers limits the exposures it writes to those of its owners?

Captive insurer

Which of the following is TRUE if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made?

The account can be rolled into the surviving spouse's IRA

When does the producer give a premium receipt for a life insurance application?

When the initial premium has been collected with the application

which of the following is considered to be an unfair claims settlement practice? a. using intimidation in order to restrain or monopolize the business of insurance b. misrepresenting pertinent policy provisions relating to coverage after a loss c. a producer who shares commission with a client d. requiring a time limit for submitting a claim

b. misrepresenting pertinent policy provisions relating to coverage after a loss

These are all accurate statements regarding universal life insurance EXCEPT a. mortality charge is deducted from the policy's cash value each month b. policy loans are not permitted c. flexible premiums as long as the cost of insurance protection is covered d. policy states what % pf premium is contributed to the cash value and pays for the cost of insurance

b. policy loans are not permitted

an annuity's accumulation period may

continue after the purchase payments stop

which of the following is not information needed to determine the suitability of an annuity recommendation a. annual income b. age c. financial objectives d. level of education

d. level of education

Which of these factors does NOT affect life insurance premium rates? a. expense factor b. interest factor c. mortality factor d. producer certification

d. producer certification

which of these is not a reason to buy a term life policy? a. to pay a mortgage balance if an insured dies b. to offer temporary protection c. to offer low-cost insurance coverage d. to accumulate savings

d. to accumulate savings

a new hampshire resident producer must meet specific continuing education course requirement within a __ year period

two