L&H

Steve Merrill surrenders his whole life policy for the $12,000 of cash value. During the time it was in force he paid $11,000 in premium. What will the tax effect be, if any?

$11,000 received is tax free and $1,000 is taxable

Irene is age 33 and purchases a twenty-pay whole life insurance policy. The death benefit is $50,000. It is attractive to Irene since she will no longer be required to make premium payments at the end of the twenty year period. When will her policy mature? Age 53 Age 65 Age 70 Age 100

100

The Transworld Partnership is comprised of four partners. Unanimously they decide to enter into a cross-purchase type of buy-sell agreement. If this agreement is funded by life insurance, how many total policies will be purchased? Four Eight Twelve Sixteen

12

ack Morgan applies for life insurance on March 8th. The application is sent to underwriting on March 9th. Approval is provided by the insurer on March 17th. The policy is issued March 19th and the agent delivers it to Jack on March 22nd. When will the free-look period end? March 22nd March 31st April 1st April 2nd

1st

A conversion privilege is included in all forms of group life insurance. How long is the conversion period available? 20 days 21 days 30 days 31 days

31 days

If a policy loan plus cash values exceed premium payments, which of the following is true? 1. The policy becomes a modified endowment contract 2. The policy must be surrendered 3. The loan amount is tax-deductible 4. The loan may be subject to taxation

4

This type of qualified retirement plan is designed for those individuals who work for a nonprofit organization, such as a church, school or hospital. 401(k) 403(b) Keogh Plan 457 Deferred Compensation Plan

403(b)

if an insurer fails to notify an applicant that his reinstatement application was not approved, coverage must automatically be reinstated within what period of time? 10 days 15 days 30 days 45 days

45

Proof of loss must be submitted to the insurer within

90 days of loss

Which of the following statements best defines an annuity? An annuity provides a death benefit to a primary beneficiary An annuity is a systematic liquidation of funds A government employee A series of periodic debt retirements

An annuity is a systematic liquidation of funds

Applications for life insurance must be signed by the appropriate parties. Which of the following are required to sign a life insurance application? Producer and insured Applicant and producer Applicant and insurer Policyowner and producer

Applicant and producer

producer completes an application and collects the initial premium, he or she must leave a premium receipt with the applicant. A conditional premium receipt states that coverage is effective: When the policy is issued As of the date the application is approved by underwriting When the policy is delivered As of the date of receipt if the application is approved as applied for

As of the date of receipt if the application is approved as applied for?

All of the following are reasons for the revocation of an insurance license, EXCEPT: Violations of insurance law Rebating Embezzlement of premiums Changing company affiliations

Changing company affiliations

Joan borrowed $11,000 to purchase a new boat. What type of individual life insurance policy is best suited to make sure that her loan is paid off in the event of her death? Level term insurance Family policy Annual renewable term insurance Decreasing term insurance

Decreasing term insurance is the closest related with debt, this is the least expense policy with a higher death benefit at first

A policyowner may leave dividends payable with an insurer to accumulate at interest. What are the tax ramifications of this dividend option? Dividends received from a life insurance policy are taxable as ordinary income Interest earned on dividends left with the insurer is not taxable as income Interest earned on dividends left with the insurer is taxable as income Dividends paid on life insurance are the equivalent of stock dividends

Interest earned on dividends left with the insurer is taxable as income

All of the following requirements must be satisfied before a person may be issued a resident insurance license, EXCEPT: Must pass a state exam Must be a state resident Must be a college graduate Must be deemed competent and trustworthy

Must be a college graduate

Which of the following would be best served by a buy-sell agreement funded with life insurance? An employee who cannot afford premiums One of four corporate owners who desires future control of the business A municipality A sole proprietorship

One of four corporate owners who desires future control of the business?

A whole or straight life policy with a cash savings feature includes non-forfeiture options. Which of the following options will provide the policyowner with a smaller face amount of insurance for life? Paid-up additions Extended term insurance Lump sum Reduced paid-up insurance

Reduced paid-up insurance

Which of the following statements best describes the entire contract provision? The entire contract provision summarizes the coverage provided by the policy The entire contract provision lists the requirements for reinstatement The entire contract provision states that the whole life contract consists of the policy and a copy of the original application The entire contract provisions stipulates the length of the free-look period

The entire contract provision states that the whole life contract consists of the policy and a copy of the original application

Paula is 24 years of age and owns a $20,000 whole life policy with a guaranteed insurability rider. At age 25, Paula exercised her first option without proving insurability and purchased another $20,000 policy. At age 27 Paula contacted the insurer and asked if she could exercise her next option a year early. How will the insurer respond? The insurer will allow Paula to move up to the next option date The insurer will not allow Paula to exercise her next option since the rider ends following the first option The insurer informs Paula that she cannot move up to her next option date but she may buy more insurance by proving insurability The insurer will allow Paula to move up to her next option date if she provides evidence of insurability

The insurer informs Paula that she cannot move up to her next option date but she may buy more insurance by proving insurability

The Fair Credit Reporting Act requires that a notice to the applicant be included and a premium receipt provided to a life insurance applicant. This notice explains that: Insurers will require medical exams for all applicants Premiums will be refunded after the free-look period expires The insurer may conduct an investigative consumer report at its discretion Credit terms are included in contracts providing whole life or term insurance

The insurer may conduct an investigative consumer report at its discretion

Which of the following statements is true regarding a "Conditional Receipt" This receipt indicates that coverage is provided immediately when payment is received This receipt date is always on a date earlier than the issue date of the policy This receipt is also known as a binding receipt This receipt states that coverage will become effective once a physical examination is completed

This receipt date is always on a date earlier than the issue date of the policy

When will a producer request that an insured sign a statement of continued good health? At the time of application When the initial premium is paid When inspection reports are completed At the time of policy delivery

When the initial premium is paid

Why is it that a death benefit from a life insurance contract cannot generally be paid to a beneficiary who is a minor? 1. The minor does not understand how to manage money 2. The minor is not competent to control the funds 3. The minor is under age twenty-one 4. The minor has no ownership rights

a minor is not competent to control the funds

Statements made by an applicant which are recorded on an application are considered representations and not warranties. Which of the following best describes a warranty? A failure to disclose a material fact A statement or condition that the applicant represents to be absolutely true Any statement made by the applicant as part of the insurance contract A statement that the contract is in accordance with state law

absolutely true statement

If an applicant for life insurance intentionally misstates his age on a life insurance application, what action will the insurer take five years later when it learns of the misstatement? The insurer will cancel the policy The insurer will void the policy The insurer will adjust the death benefit The insurer will increase the premium

adjust benefits

Insurable interest in a life insurance policy must exist at time of application, or no later than: At the time of loss At the time the policy is issued At the time of delivery At the time of submission

at the time policy is issued

When must a Policy Summary be provided to an applicant for insurance? At time of policy delivery Prior to time of application At any time Only upon request by the applicant

at time of delivery?

each of the following is provided to the policyowner of a universal life policy on an annual basis, EXCEPT Upcoming premium Policy expenses Change of beneficiary form Interest earnings

beneficiary change forms

Each of the following is provided to the policyowner of a Universal Life policy on an annual basis, EXCEPT? Last premium paid Policy expenses Change of beneficiary form Interest earnings

beneficiary form

John completes a life insurance application on Bill and collects the initial premium. A conditional receipt is provided to the applicant. If underwriting approves the application without requiring a medical exam, when will coverage become effective? When the application is delivered to underwriting When the policy is delivered to the policyowner As of the date of the receipt When the next installment premium is paid

date of receipt

Permanent or continuous premium whole life insurance includes a policy loan provision. All of the following statements are true regarding this policy provision, EXCEPT: A maximum fixed interest rate or variable rate is generally available If an unpaid loan exists when the insured dies, it will be subtracted from the face amount with the balance paid to the beneficiary A delay clause of twelve months is included in a policy loan provision A policyowner need not pay off policy loans during the life of a contract

delay clause of 12 months is false a loan may only be delayed up to 6 months

Each of the following is a characteristic of a variable annuity, EXCEPT: Funds placed in a separate account Rate of return will vary Funds advance with economic conditions Guaranteed return

guaranteed return

Allan is 44 years of age and is awarded a 2.5 million dollar settlement as a result of an auto accident. Due to the accident, Allan is totally disabled and can no longer earn an income. If he wishes to purchase an annuity with part or all of the award, what type of contract would you, as an agent, recommend? Deferred annuity Joint and survivor annuity Immediate annuity Fixed annuity

immediate annuity as a form of income (available soonest after 30 days)

By definition, an insurance agent is a legal representative of the: Client Insurer they are appointed with Client and themselves Insurance Department

insurer they are appointed with

Which of the following beneficiary designations states that the policyowner may not change the designation without the knowledge and consent of the beneficiary? Irrevocable beneficiary Revocable beneficiary Per stirpes beneficiary Tertiary beneficiary

irrevocable beneficiary cannot be changed without consent

This annuity continues to pay benefits to any remaining annuitants, even after one of the annuitants has died. Which choice below best describes that situation? Individual annuity Joint and survivor annuity Joint life annuity Straight life annuity

joint and survivor annuity?

Settlement options available to a beneficiary allow for the disposition of proceeds of a life insurance contract. Which of the following options possesses the greatest degree of risk for the beneficiary? Life income option At interest option Lump sum option Fixed period option

life income? because no certain period

Mike Brown is 32 years of age and is attempting to decide what type of whole life policy he should buy. If cash flow is his primary consideration, which of the following policies would be most beneficial to Mike? Twenty-pay whole life Thirty-pay whole life Life paid-up at age 65 Ten-year endowment

life paid up at 65

annuity

liquidation of funds

A basic hospital plan may be made up of hospital expense benefits and surgical expense benefits. Which of the following is true with regard to surgical expense benefits? Coverage for the cost of ancillary expenses is provided on a reimbursement basis The cost of x-rays is generally covered without the satisfaction of a deductible Amounts listed in the policy's benefit schedule are usually expressed in terms of the maximum benefit payable Policy benefits are subject to deductibles of $1,000 or more

maximum benefit listed on schedule?

A variable whole life policy is characterized by investing cash values in stocks, bonds, or mutual funds. Which of the following statements is not true concerning this form of whole life protection? Variable whole life provides a guaranteed minimum death benefit Variable whole life includes a flexible premium Variable whole life cash values are deposited in a separate account The amount of a variable whole life death benefit is dependent upon the performance of securities

not true: Variable whole life includes a flexible premium fixed premiums instead

Ken Halloren has a life insurance policy with a waiver of premium benefit. If he becomes disabled for a lengthy period of time, the insurer will begin to waive the premium in which of the following months? The sixth month following the onset of the disability The seventh month following the onset of the disability The ninth month following the onset of the disability The twelfth month following the onset of the disability

on the seventh month after the 6 month waiting period

Which dividend option in a whole life policy allows the policyowner to buy a different type of life insurance? Paid-up additions One year term insurance Accumulate at interest Reduce the premium

one year term insurance switches from whole life to term insurance (paid up additions would only add the same type of whole life coverage)

What life insurance policy provision permits the policyholder to select the face amount of protection, name a beneficiary, or borrow from the policy's cash savings value?

owners rights

Which of the following statements is true with regard to Adjustable Life insurance? It is characterized by pure protection It involves prospective modifications It involves retroactive adjustments It provides for a systematic reimbursement of funds

prospective modifications

each of the following is an unfair marketing or trade practice, EXCEPT: Rebating Defamation Replacement Misrepresentation

replacement is not unfair market practice

Producers may generally share commissions with which of the following? An insured An officer of an insurer Another producer licensed in the same line of insurance The holder of a temporary license

same line

Which of the following provides the least expensive type of life insurance protection? Accidental death rider Term life insurance policy Whole life insurance policy Convertible term life insurance policy

term life insurance

The policyowner wishes to provide for the care of her minor child in the event of premature death. To accomplish this, the owner should probably designate as beneficiary: A trust A spouse as a revocable beneficiary The estate of the deceased A favorite charitable organization

trust

This type of life insurance policy is characterized by the potential for flexible premium payments. Universal Life Variable Life Level Term Family Income Policy

universal life

Many states require the inclusion of a free-look provision in health insurance policies. Which of the following statements is true with regard to this provision? The free-look period begins when the policy is delivered to the policyowner The free-look period begins on the date the application is completed This provision provides the applicant with an opportunity to review the policy at a higher cost The free-look provision permits an insured to increase coverage without demonstrating insurability

upon delivery

A period of time which functions like a deductible and is found in a disability income policy best describes a: Probationary period Conversion period Waiting period Free-look period

waiting period the probationary period is the time after coverage starts that you cannot file a claim waiting period=elimination period but not the same as probation (used in dental)

If an insured receives an incomplete application from its producer but issues the contract in spite of this, the insurer has engaged in: A waiver A warranty An estoppel A parole evidence rule

waiver

Which of the following riders prevents a policy from lapsing if the insured becomes disabled? Guaranteed insurability Waiver of premium Cost of living Payor benefit

waiver of premium

Tom purchased a life insurance policy twenty five years ago. If the policy states that the cash value will be $320 per $1,000 of coverage in the twenty-fifth year, what type of policy did Tom buy?

whole life benefits and cash values described as $ per $1000