Insurance test

An insured receives an annual life insurance dividend check. What term best describes this arrangement?

Cash option

Which of the following includes information regarding a person's credit, character, reputation, and habits?

Consumer report

An insurance company sells an insurance policy over the phone in response to a T.V. ad. Which of the following best describes this act?

Direct response marketing

The death benefit under the Universal Life Option B

Gradually increases each year by the amount the cash value increases

Events or conditions that increases the chances of an insured loss occurring are referred to as

Hazards

If an insurance company issues a policy even though some questions on the application were unanswered, where can the insurer get the answer to those questions?

Never; the insurer has waived its right to those answers by issuing the policy

Which of the following best details the underwriting process for life insurance?

Selection, classification, and rating of risks

What is the name of the insured who enters into a viatical settlement?

Viator

A person convicted of willfully violating an Insurance Law of Alabama is subject to

A fine up to 1,000, imprisonment, and a sentence to hard labor for a period of one year

what are the five characteristics of an ideally insurable risk?

A. Loss must be 1)due to chance, 2)definite and measurable, 3) Statistically predictable, 4) not catastrophic, and 5) coverage cannot be mandatory

Who has the ability to request the change of a life policy's beneficiary?

Insured

Which of the following is Not true regarding a nonqualified retirement plan?

It needs IRS approval

Which of the following refers to the amount of retirement benefits a worker receives under social security based on the worker's earnings and retirement age?

PIA(Primary Insurance Amount)

Based on Human Life Approach, which of the following is NOT used to calculate an individual's life value?

Predicted needs of the family after the insured's death. Based on insured's income and expenses

Which of the following applicants would NOT qualify for a Keogh Plan?

Someone who works 400 hours per year. A person must have worked at least 1,000 hours per year to be eligible for Keogh plan

Should an insurer accept business from a producer who is not appointed as that insurer's agent, what penalty may be exacted?

The insurer is fined 3 times the amount of the premium received on that business

Who must have insurable interest in the insured?

The policyowner

The amount of premium payment

Which of the following will be stated in the consideration clause of a life insurance policy?

Option A

Which universal life option has a gradually increasing cash value and a level death benefit?

Who is a third-party owner?

A policy owner who is not the insured

an insurance producer who by contract is bound to write insurance for only one company is classified as a/an

captive agent

A tax-sheltered annuity is a special tax-favored retirement plan available to

certain groups of employees only

With a Single Premium Deferred Annuity (SPDA), when are the benefits paid?

After more than 1 year

Contracts that are prepared by one party and submitted to the other party on a take-it or leave-it basis are classifies as

Contracts of adhesion

Which of the following entities established the DO-NOT-CALL registry?

Federal trade commission

Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation?

Human life approach

Which of the following is correct concerning the taxation of premiums in a key person life insurance policy?

Premiums are not tax deductible as a business expense

All of the following are true of annually renewable term insurance EXCEPT

Proof of insurability must be provided at each renewal

Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?

Univeral Life-option A

A policy will pay the death benefit if the insured dies during the 20-year-premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this?

level term

A situation in which a person can only lose or have no change represents

pure risk

Which of the following policies typically combine insurance and savings with a date of maturity earlier than age 100 at great expense to the policyholder?

Endowment at age 65

According to the Law of Agency, a principal is represented by whom?

Agent or producer

What documentation grants express authority to the agent?

Agent's contract with a principal

Which of the following is NOT considered a misrepresentation as it pertains to unfair trade practices?

making comparisons between different policies

What happens to the face amount of a whole life policy if the insured reaches age 100?

the face amount is paid to the insured

To maintain their license in this state, how many hours of continuing education must producers complete every 2 years?

24

Who can make a fully deductible contribution to a traditional IRA?

An individual covered by an employer sponsored plan who has earned income

The death protection component of Universal Life insurance is always

Annually renewable term

Which statement is INCORRECT regarding the type of term insurance that fits best with the applicant's needs?

Applicants who may require a larger death benefit should buy convertible term insurance

What is the cost of coverage based on for group life insurance

Average age and the ratio of men to women

When must an IRA be completely distributed when a beneficiary is not named?

December 31 of the year that contains the fifth anniversary of the owner's death

A resident of another state wishing to transact insurance in Alabama may obtain a nonresident producer license, without examination, upon meeting one of the following EXCEPT

Be an executive officer of an insurance company

Which of the following would not trigger the payment of Accelerated Death Benefits?

Being permanently disabled

What is the purpose of life insurance?

Create an estate immediately

What does "level" refer to in level term insurance?

Face amount

What are illustrations in a life insurance policy?

Presentations of non guaranteed elements of the policy

A person who does not lock the doors to his or her house shows an indifferent attitude. This person presents what type of hazard?

Morale. Person does not care about his belongings.

What is the official name for the social security program?

Old Age Survivors Disability Insurance

How are contributions to a tax-sheltered annuity treated with regards to taxation?

They are not included as income for the employee, but are taxable upon distribution

Which of the following statements regarding the taxation of Modified Endowment Contracts is False?

Withdrawals are not taxable

All of the following apply to defined benefit plans EXCEPT

Contributions are tied to company profits

What are the two components of a universal policy?

Insurance and cash account

Which of the following insurance options would be considered a risk-sharing arrangement?

Reciprocal

The National Do NOT Call Registry was created to regulate

Telemarketing

To which of the following do replacement rules apply?

Whole life

Which of the following produces evaluations of insurers' financial status often used by state departments of insurance?

AM best

Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe?

Adhesion

What are the four elements of an insurance contract?

Agreement (offer and acceptance), consideration, competent parties, and legal purpose

All of the following are examples of third-party ownership of a life insurance policy EXCEPT

An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan.

When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is

Conditional. The contract is formed on the basis that certain conditions are met

All of the following are lines of insurance that may be transacted under a life and accident/health producer license except

Consequential loss insurance

If an insurance producer is to charge to the client a fee that is in addition to

Disclose the fee to the client, in writing, and be agree upon prior to the issuance of the policy

A policy matures and pays the face amount if the insured lives to a specified date. This best describes

Endowment policy. Can endow at any time specified in the contract.

Life insurance may be used to pay state inheritance taxes and federal estate taxes eliminating the need to sell assets from the estate. What is this called?

Estate conservation

Which of the following is NOT a type of information that needs to be gathered in order to determine the value of someone's life when using the needs approach?

Estimated longevity

In the Executive Bonus plan, who is the owner of the policy, and who pays the premium?

Executive is the owner, and the executive pays the premium

Using names or titles that have tendency to misrepresent the true nature of a policy is an example of what illegal practice?

False advertising

Both Universal Life and Variable Universal Life has a

Flexible premium

Which authority is NOT stated in an agent's contract but is required for the agent to conduct business?

Implied

Life income joint and survivor settlement option guarantees

Income for 2 or more recipients until they die

What type of insurance would be used for Return of Premium rider?

Increasing term

What type of report provides information about the applicant's hobbies, habits, and financial status?

Inspection report

In the agent/insurer relationship, who is considered the principal?

Insurer

What provision of a life insurance policy states the insurer's duty to pay benefits upon the death of the insured. and to whom the benefits will be paid?

Insuring clause

Which of the following is NOT true regarding a Certificate of Authority

It is issued to group insurance participants

In modified life policies, what happens to the premium?

It is level at the beginning and increases after the first few years

How does insurance distribute the financial consequences of individual losses?

It transfers the risk to all persons insured

Concerning juvenile Life Insurance, which of the following statements is INCORRECT?

Juvenile life is classified as any life insurance purchased by a minor

Insuring clause, at the beginning of policy,

List parties, premium, length of coverage, and amount of death benefit

An applicant conceals relevant health information on the application. The applicant represents what type of hazard?

Moral

A rider attached to a life insurance policy that provides coverage on the insured's family members is called

Other-insured rider.

An insured has a Level Term Life Insurance policy that is guaranteed renewable and also includes a re-entry provision. The re-entry provision would allow the insured to renew the policy and

Pay a lower renewal premium by proving insurability

which of the following riders would NOT cause the Death Benefit to increase?

Payor benefit rider

Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?

Premiums are not tax deductible as a business expense

Which of the following statements is an accurate comparison between private and government insurers?

Private insurers may be authorized to transact insurance by state insurance departments

All of the following are marketing arrangements used by insurers EXCEPT

Reinsurance system. protects against catastrophic issues

What are the personal uses of life insurance

Survivor protection, estate creation and conservation, cash accumulation, and liquidity

Which of the following is true regarding a market value adjusted annuity?

The owner is guaranteed a fixed interest rate for a specific period of time.

Under an extended tern nonforfeiture option, the policy cash value is converted to

The same face amount as in the whole life policy

Which of the following is Not true of settlements?

The seller must be terminally ill

Which of the following is TRUE about nonforfeiture values?

They are required by state law to be included in the policy

Which of the following is true about nonforfeiture values?

They are required by state law to be included in the policy.

Which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child where the parent is the policy owner?

Third-party ownership. For business situations or for minors in which parents owns the policy

Agents who persuade insureds to cancel a policy in favor of another one when it might not be in the insured's best interest are guilty of

Twisting

Which of the following policies can be described as a flexible premium adjustable life policy?

Universal Life

All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCPET

Upon conversion, the death benefit of the permanent policy will be reduced by 50%

Which of the following types of insurance is investment based, has a level fixed premium, and a non guaranteed cash value?

Variable whole life

The provision that sets forth the basic agreement between the insurer and the insured and stated the insurer's promise to pay the death benefit upon the insured's death is called the

insuring clause

A policyowner no longer needs a life insurance policy and agrees to sell it to a third party for more than its cash value. this type of transaction is called a/an

life settlement

All of the following are examples of risk retention EXCEPT

premiums. planned assumption of risk

What is the penalty for the IRA distributions that are below the required minimum for the year?

50

Which of the following is the required number of participants in a contributory group plan?

75%

When the insurer stipulates the time period of payment of claims, how soon must the insurer pay a death benefit claim after receiving the proof of death?

2 months

For a producer to meet state continuing education requirements, how many CE hours must be completed on the topic of ethics?

3

Licensees must make a report of any action taken against them in another jurisdiction or by another government agency in Alabama within how many days of the final disposition of the matter?

30

When replacement is involved, how long must existing insurers maintain records of replacement notifications?

5 years

When risks with higher probability of loss are seeking insurance more often than other risks, this is known as what?

Adverse selection

Which of the following is true regarding the spendthrift clause in life insurance policies?

It can protect the policy proceeds from creditors of the beneficiary

Which of the following riders provide for the payment of part of the policy death benefit if the insured is diagnosed with a terminal illness that will result in a death within 2 years?

Living Needs rider

What is the other term for the cash payment settlement option?

Lump sum

In a single employer group plan, what is the name of the policy issued to the employer?

Master contract

The life Insurance solicitation regulation was promulgated to do the following:

Provide adequate information to consumers regarding relative cost of insurance products

Which of the following would help prevent a universal life policy from lapsing?

Target premium.

Which of the following entities was created to protect insureds against an insurer's insolvency?

The Life and Disability Insurance Guaranty Association

A business is the owner and beneficiary of the key-person life policy. When the business collects the policy benefit, how is it taxed?

The benefit is received tax free

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding the change?

The death benefit can be increased by providing evidence of insurability

All of the following are TRUE statements regarding the accumulation at interest option EXCEPT

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

All of the following statements concerning the use of life insurance as an Executive Bonus are correct except

The policy is owned by the company.

An individual applies for a life policy. Two years ago he suffered a head injury from a accident, so he cannot remember parts of his past, but is otherwise competent.He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history one year later. What will probably happen?

The policy will not be affected

If an insured continually uses the automatic premium loan option to pay the policy premium

The policy will terminate when the cash value is reduced to nothing

The waiver of cost of insurance rider is found in what type of insurance?

Universal life

Which of the following insurance products are covered under solicitation regulations of the insurance code?

Whole life

An adjustable life policy can assume the for of either

term or permanent life