Insurance License
How many days does a buyer, who is over 65 years old, have to return an annuity contract for a full refund?
30 days
How long do most states allow an insurance company to delay the payment of a cash surrender under the Delayed Payment provision
6 months
Which situation would not require the insured's consent when a life insurance policy is issued?
A policy is purchased by a parent for a minor child
Which of these is an accurate statement regarding the fixed period settlement option on a life insurance policy?
A portion of the payments paid to the beneficiary comes from interest calculated on the proceeds of the policy
An insurance company's failure to enforce a contract's provision is called a(n)
A waiver
During the application process, a statement made by an applicant that becomes part of the contract is considered to be a(n)
A warranty
When there is a named beneficiary on a life insurance policy, the death benefits
Are paid directly to the benficiuwithout interference from the insured's creditors
Kevin has an existing life insurance policy and assigns it to another insurer for a new contract. How would this transaction be treated for tax purposes?
As a Section 1035 exchange
Which of these is true regarding the exchange of consideration among parties involved in an insurance contract?
Can be unequal
Which would be described as a beneficiary
Children of the insured
The insurer's obligation to pay a claim depends on whether the insured or beneficiary has compiled with all policy conditions. This makes the policy a(n)
Conditional contract
An insurance application requires an applicant to make a full, accurate disclosure of the risk factor involved. Using this criteria, an insurance policy is considered what type of contract?
Contract of utmost faith
What effect does interest income have upon insurance premiums?
Decreases premium
Christopher is issued an insurance policy that contains an attached agreement which alters the terms of the policy. This is attached agreement is called an)
Endorsement
Which provision makes the application part of the annuity contract?
Entire contract clause
Which is a Valid Section 1035 Exchange?
Exchanging a whole life policy for a universal life policy
Death benefits from a life insurance policy are normally considered to be
Exempt from federal income tax
The powers directly given to a producer in an agency contract are called
Express
A policyowner fell behind on the premium payments of a whole life policy and 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
Which tax cost is normally associated with death?
Federal estate tax
Which tax is normally associated with an individual's 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
Which settlement option makes minimum guaranteed dollar payments over a stated number of years?
Fixed-Period
One premium payment covers which period of time in a single premium whole life policy
Full life of the policy
Small corporations often purchase life insurance on the lives of major stock holders to
Fund a buy-sell agreement
An additional purchase option in a life insurance policy also is known as a
Guaranteed insurability rider
The unwritten authority given to a producer to carry out necessary incidental acts of the agency agreement is called
Implied authority
XYZ Insurance Company gives direct authority to its producers to sell insurance through an agency contract, but nothing is stated regarding the collection of premiums. Which authority grants the producer the right to collect premiums?
Implied authority
What happens when an initial offer is answered with a counteroffer?
Initial offer is void
Which statement is INCORRECT about the interest-only settlement option in a life insurance policy?
Interest on proceeds must be paid by the beneficiary
In what way are insurance policies said to be aleatory?
Involves the potential for the unequal exchange of value
When a policy loan is requested by a policyowner and it requires the consent of the beneficiary, what kind of beneficiary designation is this?
Irrevocable beneficiary
Which life insurance settlement option pays lifetime benefits to two or more people?
Joint and survivor
A life insurance beneficiary died after receiving only six payments under the policy's life income settlement option. What happens with the remaining balance of the death proceeds?
Kept by the insurance company
How much is normally paid to a policyowner in a life (viatical) settlement?
Less than the death benefit
Which of these do NOT indicate the presence of insurable interest in a life insurance contract?
Lifelong friendship
A life policy's spendthrift clause would have no effect if the beneficiary is paid the proceeds as a
Lump-sum payment
Which of the following situations would an insurance agent need to guard against liability for professional errors and omissions?
Making a recommendation to a potential insured to replace existing coverage
What would be a valid reason for naming a trust as the beneficiary of a life insurance policy as opposed to naming an individual?
Management of proceeds would be provided
Which of the following relationships demonstrates insurable interest in the absence of economic interest?
Marriage partners
Greg applies for insurance and makes a false statement on the application that will influence whether or not the insurer will accept the risk. Greg's false statement is called a(n)
Material misrepresentation
What is considered a valid reason for an insurer's refusal to pay policy proceeds directly to a minor?
Minors cannot legally enter into a contract
Life insurance premiums are computed on what three factors?
Mortality, interest, expenses
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
Which element of a contract constitutes a definite and unqualified proposal by one part to another?
Offer
Insurable interest involves what assumption?
One person benefits from another person's continued life
All of these statements correctly describe an aleatory contract EXCEPT
Only one party makes any kind of legally enforceable offer
Which statement best describes a single premium whole life policy?
Paid-up policy that offers lifetime protection
A life insurance policy's contingent beneficiary is the
Person who recieves the death benefits if the primary beneficiary dies before the insured
The beneficiary of a life insurance policy is normally selected by whom?
Policyowner
Which of these factors does NOT affect life insurance premium rates?
Producer Certification
Which of these occurrences could improve an insurer's ability to reduce premiums?
Rate of earnings on investments increase
Ambiguities in insurance contracts are typically interpreted in favor of the insured. This rule is referred to as
Reasonable expectations
An insured is entitled to coverage under a policy that a prudent person would expect it to provide. This principle is called
Reasonable expectations
T is covered by an Accidental Death and Dismemberment (AD&D) policy that has an irrevocable beneficiary. What action will the insurance company take if T requests a change of beneficiary?
Request of the change will be refused
What is the insurer responsible for when a producer is acting within the scope of authority granted in the agency contract?
Responsible for acts by the producer that are authority only
What kind of arrangement gives the policyowner the right to change the beneficiary?
Revocable designation
Switching Life insurance policies without tax consequence is permitted under
Section 1035 rules
Which of the following would NOT have a restricted ability to enter into a contract?
Small employer
Which life insurance policy provision prohibits a beneficiary from "commuting, encumbering, withdrawing, or assigning" any portion of the proceeds prior to actual receipt from the company?
Spendthrift Clause
Which statement regarding the joint and survivor life insurance settlement option is NOT true?
The amount of each installment is larger than the single life income option
Which of the following statements is true about group credit life insurance
The amount of insurance is based on the amount of the outstanding loan balance
Which is true about the benefits under a life annuity with period certain?
The benefits are guaranteed for a stated minimum number of years
Which statement regarding a fixed period settlement option is correct?
The installment payment amount is determined by the total number of installments
Where will a life insurance policy's proceeds be directed to if all the beneficiaries die before the insured?
The insured's estate
Under the Law of Agency, the principal is considered to be
The insurer
An arrangement where an individual is authorized to act on behalf of another person or company is established through
The law of agency
Which of the following statements about the installments for a fixed period settlement option in life insurance policies is NOT true?
The periodic payment amount is determined by the beneficiary's age
Who is the beneficiary in a life insurance policy?
The stated person or entity who is designated to receive the death proceeds
What would be the disadvantage of naming a trust as beneficiary of a life insurance policy?
Trust administration fees would reduce policy proceeds
How long does a life annuity pay out?
Until the Annuitant dies
A policyowner with a terminal illness who sells his life insurance policy to a third party is called a
Viator
Giving up a known right on a voluntary basis is called a(n)
Wavier
A contract is considered void in all of the following situations EXCEPT
When consideration is unequal
The following are all elements of a valid contract EXCEPT
Written Evidence
A producer working for an insurance company my be personally liable for
acts performed which are prohibited in the agency contract
Use of XYZ Insurance Company brochures, business cards, and rating guides is an example of
apparent authority
All positive HIV test results must be disclosed to:
applicant
To have "an insurable interest" in the life of another person, an individual MUST have a reasonable expectation in
benefiting from the other persons continued life
Voluntarily terminating an insurance policy is also known as
cancellation
The payment of the first premium, the promise to pay a covered loss, and the agreement to abide by policy conditions are all examples of
consideration
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
Al surrenders his life insurance policy for its cash value. The total of the premiums paid into the policy minus total dividends received in cash or used to offset premiums is referred to as the
cost basis
An agreement is reached when an insurance contract is formed. Which of the following is NOT considered to be an element of an agreement?
equity
An appointed producer's implied authority is derived from
express authority
Death proceeds from a life insurance policy are typically included in a deceased insured's gross estate
for federal income tax reasons
The Designation of a beneficiary by class in a life insurance policy means that
individual beneficiaries are not specified by name
When premiums are determined, one factor would be the expenses of the
insurer
During the early years of a whole life insurance policy, the cash value will normally be
less than the total premiums paid
An insurance contract may be voided if a misrepresentation found on the application is determined to be
material
A life insurance company just paid a $100,000 death benefit to a beneficiary. When the insured died, the cash value was $15,000 and the total premiums-paid equaled $10,000. How much of the proceeds will be added to the beneficiary's gross income for federal income tax purposes?
nothing
A cause of loss is
peril
A single premium whole life insurance policy mav be defined as a policy that provides
protection for life as a paid up policy
A single premium whole life insurance policy may be defined as a policy that provides
protection for life as a paid up policy
Statements made by an insured on an accident and health insurance application are considered to be
representations
Which of the following statements is true about universal life insurance
the policy stipulates the amount of each premium that will be used for company expenses
A terminally ill policyowner decides to sell his life insurance policy at a discount to help support his family. This sale is called a(n)
viatical settlement
An insurance company can be liable for a producer's unauthorized acts
when the agency contract is unclear concerning the authority given
