Licensing Exam Prep (2)
An application for a disability insurance policy has a heart condition of which they are unaware and therefore they answer no to the question pertaining to heart problems on their application. Their answer is considered to be a
Representation
What is interest only in a settlement option?
Insurer retains the principal and only pays out interest.
What is a specific requirement regarding the number of employees in a SIMPLE plan?
No more than 100 employees
Cash value guarantees in a whole life policy are called
Nonforfeiture values
Dividends received on participating life insurance policies are
Not taxable because they are a return of unused premiums
Which of the following is consideration on part of an insurer?
Paying a claim
Which of the following is NOT true about a joint and survivorship annuity benefit option?
Payments stop after the first death among the annuitants
An equity indexed annuity will grow based upon
Performance of a recognized index
Which can request changes in premium payments, face value loans, and policy plans?
Policyowner
An insurer that operates for one or more social, educational, charitable, benevolent, or religious purpose for the benefit of the members is known as
A fraternal insurer
All of the following are true of annually renewable term insurance EXCEPT
Proof of insurability must be provided at each renewal
What is the purpose of a grace period?
Protects policyholders from losing insurance coverage if they are late on a premium payment.
Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits?
Fixed amount
True or false:
Group insurance is written as annually renewable term insurance.
According to the Fair Credit Reporting Act, all of the following statements are true EXCEPT
If an applicant is declined for an insurance policy, he or she has no right to know what was in the report.
If a loan request is for payment of due premiums on the policy, how soon must the insurer issue a loan?
Immediately
Which of the following is the primary source of information that an insurer uses to evaluate an insured's risk for life insurance?
Insurance application
Which of the following terms refers to solicitation, negotiation, effectuation or advising related to an insurance contract?
Insurance transaction
In group insurance, who receives the certificates of insurance?
Insured individuals
Which 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
An insured will be allowed to reactivate her lapsed life insurance policy if action is taken within a certain period of time, and proof of insurability. which policy provision allow this?
Reinstatement provision
What does survivorship mean?
Second to die (last survivor)
An IRA purchased by a small employer to cover employees is known as a
Simplified Employee Pension Plan
A whole life policy that will generate immediate cash value is a
Single premium policy
Which of the following groups is NOT eligible for group life insurance?
Social groups
Which of the following applicants would NOT qualify for a Keogh Plan?
Someone who works 400 hours per year
Which of the following will NOT be included in the buyer's guide?
Specific information about the policy
Which of the following would be considered a nonqualified retirement plan?
Split-dollar plan
Which of the following types of insurance products would be appropriate for an individual with a low income and high insurance needs?
Term insurance
Which of the following policies would NOT offer a policy loan option?
Term life
Which of the following statements regarding HIV testing is NOT true?
Test results must be sent to the Department of insurance
Which of the following statements concerning the Medical Information Bureau is correct?
The MIB assists underwriters in evaluating and classifying risk
Which of the following would provide an underwriter with information concerning an applicant's health history?
The Medical Information Bureau
What are some exclusions with provisions?
- Aviation - Hazardous occupation - War and military service - Suicide within a specific time period
What are the three basic types of term coverage available, based on how the face amount (death benefit) changes?
- Level - Increasing - Decreasing
When must taxes be paid?
Either upon contribution or upon distribution, NOT both
What is the payor benefit?
Functions like a waiver of premium rider; used for juvenile policies.
True or false: "Level" in level term insurance refers to the death benefit, which does NOT change
True
True or false: Misstatement of age on the application will result in adjustment of premiums or benefits.
True
True or false: Pure life annuity provides the highest monthly benefit, but there is no guarantee that the entire principal will be paid out.
True
True or false: Qualified plans have tax advantages.
True
What are the key characteristics of whole life insurance?
- Level premium - Death benefit - Cash value - Living benefits
What is included in the entire contract?
- Policy - Copy of application - Any riders or amendments
What does joint life mean?
First to die
True or false: An immediate annuity is purchased with a single premium
True
True or false: An insurance application is the key source underwriters use for information about the applicant.
True
True or false: Children's term rider are one premium for ALL children.
True
True or false: Contributions to qualified plans are limited to a maximum amount
True
True or false: Group insurance is written as annually renewable term insurance.
True
True or false: Income payments from a deferred annuity begin sometime after 1 year from the date of purchase.
True
True or false: Insured's consideration is the payment of premium and statements on the application.
True
Who is eligible for group policies?
- Debtor groups - Labor union - Credit union - Trustee groups - Association groups
What is the purpose of the disclosure clause?
- Helps buyers make educated decisions - No misleading comparisons
In a noncontributory group policy
100% of eligible employees must participate
Which of the following is required number of participants in a contributory group plan?
75%
What is the MIB (Medical Information Bureau)
A nonprofit organization that collects, maintains, and makes available health information to insurance companies.
According to the life insurance replacement regulations, which of the following would be an example of policy replacement?
A policy is reissued with a reduction in cash value
Which of the following best describes a rebate?
A producer returning part of her commission to her client, as an inducement to buy
According to the terms of the policy or an agreement between the insured, the group policyholder, and the insurer, the insured person may not do which of the following?
Assign an appropriate premium based on preference
Which of the following is INCORRECT regarding $100,000 20-year level term policy?
At the end of 20 years, he policy's cash value will equal $100,000
Which of the following is INCORRECT regarding a $100,000 20-year level term policy?
At the end of 20 years, the policy's cash will equal $100,000
In whole life insurance, when is the policy cash value scheduled to equal the face amount?
At the insured's age 100
When does insurable interest exist?
At the time of the application
Which of the following is NOT an example of the company's location of incorporation?
Authorized
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?
Consideration
What does the Fair Credit Reporting Act protect?
Consumers against the circulation of inaccurate or obsolete personal or financial information
A whole life policy is surrendered for a reduced paid-up policy. The cash value in the new policy will
Continue to increase
A whole life policy is surrendered for a reduction paid-up policy. The cash value in the new policy will
Continue to increase
All of the following are true of a nonqualified deferred compensation plan EXCEPT
Contributions are tax deductible
An individual has a $200,000 convertible term life insurance policy. If he chooses, he can
Convert to a whole life policy for the same face amount without proof of insurability
A long stretch of national economic hardship causes 7% rate of inflation. A policyowner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this charge?
Cost of living
To be valid, an insurance policy must have all of the following EXCEPT
Countersignature
An adjustable life policy can assume the form of
Either term or permanent insurance
Which of the following groups is NOT eligible for group insurance?
Employer and employee groups
What is contributory plan?
Employer and employees share the cost of premium; requires 75% participation.
What is a noncontributory plan?
Employer pays 100% of the premium; requires 100% of employee participation
Which of the following is a correct statement about annuities?
Fixed annuities do not provide protection against inflation
An insurer incorporated under the laws of another state but doing business in this state is considered
Foreign
An insured bought an insurance policy that requires him to pay $150 in premiums on the 15th of each month. He then takes an extended vacation and forgets to pay the premium. Ten days later, his policy is still in effect and has not lapsed. Which provision allowed for this?
Grace period
All of the following information needs to be included on an application for life insurance EXCEPT
Health insurance policies in force
Fixed annuities provide all of the following EXCEPT
Hedge against inflation
What is a foreign insurer?
Home office is located in a different state than the one where the policies are being sold.
A fraternal benefit society
Is operated for the benefit of its members
in making an annuity recommendation to a consumer the producer must have reasonable grounds to believe that the annuity
Is suitable
The Office of Insurance Regulation is responsible for all of the following insurer activities EXCEPT
Issue of securities
When Y applied for insurance and paid the initial premium on August 14, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the risk or classify it other than as standard. Y was killed in an automobile accident on August 22, before the policy was issued. In this case, the insurance company will
Issue the policy anyway and pay the face value to the beneficiary
The form of life annuity which pays benefits throughout the lifetime of the annuitant and also guarantees payment for a minimum number of years is called
Life income with a period certain
What does an annuity protect the annuitant against?
Living longer than expected
If a settlement option is not chosen by the policy owner or the beneficiary, what option will be used?
Lump sum
Which of the following is guaranteed under a variable who life insurance policy?
Minimum death benefit
What is cash loan availability?
Policy's cash value minus any unpaid loans and interest
Policies written on a third-party ownership basis is usually written to cover which of the following?
Policyowner's minor children or business associate
Who are mutual companies owned by?
Policyowners
In a group life policy with a death benefit of more than $50,000
Premium cost above $50,000 is taxable as income to the insured.
The manner and/or frequency that the policyowner pays the policy premium is called
Premium mode
What is the difference between a straight life policy and a 20-pay while life policy?
Premium payment period
What is the difference between a straight life policy and a 20-pay whole life policy?
Premium payment period
What is automatic premium loans?
Prevent unintentional policy lapse due to nonpayment of premium
What is the spendthrift clause?
Prevents the debtors of a beneficiary from collecting the benefits before he/she receive them
If a life insurance company uses HIV testing as part of its underwriting, when must an applicant be notified of the procedure?
Prior to performance of the test
What does the Gramm-Leach-Bliley Act enact?
Prohibits insurers from disclosing nonpublic personal information to nonaffiliated third parties.
When a life insurance policy stipulates that the beneficiary will receive payments in specified installments or for a specified number of years, what provision prevents the beneficiary from changing or borrowing from the planned installments
Spendthrift provision
The family term rider incorporates
Spouse term and children's term
Which risk classification is representative of the majority of people in a certain age group and with similar lifestyles?
Standard
When an agent delivered an insurance policy to the insured, he collected the initial premium, as well as a document verifying that the insured had not had any injuries or illness since the application date. What is this document called?
Statement of good health
Which of the following actions does not constitute false advertising?
Stating that dividends are not guaranteed
Who are stock companies owned by?
Stockholders
What is the Stranger-originated life insurance (STOLI)?
Stranger places a policy on the insured with the intent of selling policy to investor.
If an applicant's health is poorer than that of an average applicant, the policy may be issued
Substandard
The advantage of qualified plans to employers is
Tax-deductible contributions
According to the Common Disaster clause, if the insured and primary beneficiary are killed in the same accident and it cannot be determined who died first, which of the following will be assumed?
The primary beneficiary died before the insured.
An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?
The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive
If an applicant submits the initial premium with an application, which action constitutes acceptance?
The underwriters approve the application
What is the purpose of settlement options?
They determine how death proceeds will be paid
A life insurance company advertises several types of policies. At the end of the advertisement, there is a statement printed in small type explaining that coverage is provided by the Guaranty Association. Which of the following is true?
This is illegal
The paid-up addition uses the dividend
To purchase a smaller amount of the same type of insurance as the original policy
True or false: 403 (b) plans are for nonprofit and public-school systems.
True
Failing to acknowledge and act reasonably promptly upon communications with respect to an insurance claim is in violation of what insurance regulation?
Unfair Claims Settlement
True or false: In annually renewable term policies, the premiums increase due to attained age.
True
True or false: In settlement options, the principal is tax free, but the interest is taxable.
True
True or false: In variable contracts, the policyowner bears the investment risk
True
What is the maximum amount of individual life insurance coverage that a person can convert to if the existing group policy has been terminated?
$10,000
An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer?
$10,000, no tax consequence
True or false: Insurers cannot refuse coverage solely on the basis of adverse information on an MIB report.
True
True or false: Insurers must obtain a certificate of authority prior to transacting business in this state.
True
True or false: The fixed-period option pays for a specific time only, whether or not the annuitant is living.
True
True or false: The insurance applicants must be notified in writing whenever insurers request investigative consumer reports.
True
True or false: The policyowner must have insurable interest in the life of the insured.
True
True or false: Waiver of premium rider waives the premium for a total disability after a waiting period.
True
True or false: When converting from group life to individual life insurance, evidence of insurability is not required.
True
True or false: Willful offenses of twisting and churning can be a fine up to $75,000
True
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
An aleatory contract is based on what kind of exchange?
Unequal exchange of values
What does aleatory mean?
Uneven exchange of values
What is misrepresentation?
A false statement in the application that can render the contract void if material to acceptance of the risk.
Which of the following would be required to become licensed as an insurance producer?
A customer service representative who solicits no more than one policy a year
The entire contract includes all of the following EXCEPT
A buyer's guide
Individual members covered by group life insurance receives
A certificate of insurance
The policyowner has an option to pledge the life insurance policy as collateral for a bank loan. This is called
A collateral assignment
Which of the following is NOT considered eligible for group life insurance?
A credit union that needs coverage only for its top 10 employees
What is a warranty?
Absolutely true statement
An insurer who transacts insurance in the state but whose articles of incorporation are registered in Canada is considered what type of insurer?
Alien
Which of the following would be an example of an unfair trade practice of sliding?
An agent falsely leading an applicant to believe than an additional coverage is required by law
What is reinsurance?
An agreement between a ceding insurer an assuming insurer
An employee dies having 6 quarters of coverage during the previous 13-quarter period. What status of coverage does the employee have under Social Security?
Currently insured
What is the insuring clause?
Basic agreement between the insurer and the policyowner
Answers to questions in an insurance application are called representations and, as such, they are
Believed to be true to the best of the applicant's knowledge
All of the following information about a customer must be used in determining annuity suitability EXCEPT
Beneficiary's Age
In terms of Social Security, what is the interval spanning between the day when the youngest child of a family turns 16 and before the surviving spouse turns age 60 called?
Blackout Period
Which of the following would be true of both the fixed-period and fixed-amount settlement options?
Both guarantee that the principal and interest will be fully paid out
Which of the following is NOT an indicator of a competent party?
Business profession
An IRA contribution can be made from which of the following?
Cash
An insured receives an annual life insurance dividend check. What term best describes this arrangement?
Cash option
Which of the following is true of the taxation of cash values in a business life insurance policy?
Cash values are tax deductible
What dies "liquidity" refer to in a life insurance policy?
Cash values can be borrowed at any time
Which of the following is true of the taxation of cash values in a business life insurance policy?
Cash values grow tax deferred
Insurers CANNOT transact insurance in this state without a
Certificate of Authority
Agents in this state are required to promptly report all of the following to the Department EXCEPT
Change in marital status
A producer advises a policyholder that he should replace his insurance policy with another, similar policy. The agent is advising this, however, for the sole purpose of earning a commission. What violation has the agent committed?
Churning
Which of the following sources would explain the state policies regarding appropriate agent conduct?
Code of Ethics of the Florida Association of Insurance and Financial Advisers
Agent McButch uses his big size and implications of his "connections" to intimidate applicants into purchasing life insurance from him. Which unfair trade practice is this an example of?
Coercion
Which of the following elements of an insurance contract requires payment of premium?
Consideration
which of the following losses would likely be covered under the accidental death rider?
Death causes by a head-on collision
During policy solicitation, an insurer exaggerates the financial condition of one of its competitors, and makes it sounds worse than it is. This is an example of an unfair trade practice of
Defamation
An insurer mails an insurance policy to a new policyowner. When the insurer relinquishes control of the policy, the policy is considered
Delivered
In this state the owner gets a "free lock" of specified number of days from
Delivery of the policy
Which of the following is NOT a standard exclusion in life insurance policies?
Disability
All of the following statements concerning dividends are true EXCEPT
Dividend amounts are guaranteed in the policy
What is reduction of premium?
Dividend is applied to the next year's premium.
What is one-year term?
Dividend is used to buy additional insurance?
What does accelerated benefit mean?
Early payment of part of death benefit to the insured from the insurer for qualifying medical expenses.
An insured decides to surrender his Whole Life insurance policy. The cash value at surrender is higher than the premium paid into the policy, due to interest. What part of the surrender value would be income taxable?
The difference between the premium paid and the cash value
What happens to the face amount of a whole life policy if the insured reaches the age of 100?
The face amount is paid to the insured
In a life insurance application, all of the following signatures will be required EXCEPT
The home office underwriter
Who bears all of the investment risk in a fixed annuity?
The insurance company
With adjustable life, the owner can change all of the following EXCEPT
The insured
If a policy insured is 64 years of age or older, the insurer must advise him or her of which of the following
The insured's right to designate a secondary addresses
Which of the following would not be eligible for coverage under key person?
The owner of a shop
All of the following are true regarding a decreasing term policy EXCEPT
The payable premium amount steadily declines throughout the duration of the contract
Which of the following is true regarding a joint life annuity?
The payments stop at the first death
Who is the annuity owner?
The person who purchases the annuity
Which of the following is TRUE regarding premium in a 10-year level premium policy?
The premium will remain level for 10 years
An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have?
Universales Life
A licensee may have their license suspended, terminated or revoked for all of the following EXCEPT
Unknowingly over insuring any property insurance risk
What are misrepresentations?
Untrue statements on the application that could void the contract.
In survivorship life policy, when does the insurer pay the death benefit?
Upon the last death
Which of the following is a key distinction between variable whole life and variable universal life products?
Variable whole life has a guaranteed death benefit
Which of the following statement is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?
Warranty
The main difference between immediate and deferred annuity is
When the income payments begin
If the policy summary for a life insurance policy is not given when the application is taken, when must the policy summary be given to the policyowner?
When the policy is delivered
Which of the following types of insurance policies would perform the function of cash accumulation?
Whole life
Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE?
Withdrawals are not taxable
During what period is a new life insurance policyholder entitled to review a policy and return it for a full refund?
Within 14 days after delivery of the policy
The renewable provision allows the policyowner to renew the coverage at the expiration date
Without evidence of insurability
What kind of policy does NOT typically require proof of insurability?
group insurance
Which two terms are associated directly with the premium?
level or flexible
What is paid-up addition?
Dividend is used to increase the face amount.
What is paid-up insurance?
Dividend is used to pay a policy early.
What is coercion?
Falsely stating that a client must buy a product in order to qualify for another one.
What is rebating?
Giving anything of value in exchange for a purchasing a policy
Under which of the following conditions would life insurance proceeds be taxable by the federal government?
If there is a transfer for value
Which of the following best describes the difference between joint life and joint and survivor annuity payment options?
In joint life option, the benefits stop after the first death
Which of the following is NOT true regarding a deferred annuity?
Income payments being within 1 year from the date of purchase
What is the Florida Life Insurance Solicitation Law?
Information and procedures required of agents and insurers when proposing life insurance to a buyer.
What is defamation?
Making false statements with the intent of injuring any persona engaged in the business.
What effect will the long-term care (LTC) rider have on the death benefit of a life insurance policy if LTC benefits were paid to the insured?
Reduce the death benefit
What is sliding?
Representing to an applicant that a specific coverage or product is required by law when it is not or included in the policy at no charge when it is.
What is guaranteed insurability?
Allows for purchase of additional insurance at specified times without evidence of insurability.
What is a domicile?
The location where an insurer is incorporated, not necessarily where the insurer conducts business.
All of the following are true of the survivorship life policy EXCEPT
The premium is based on the age of each insured
What is nonfamily insured?
Used by businesses (key person insurance)
What is the responsibility of Chief Financial Office (CFO)?
- Administer regulation of insurance agents and insurers - Investigate insurance fraud and unfair trade practices - Enforce the insurance doe
What is the responsibility of Financial Services Commission?
- Administration and regulation of insurance - Has two offices: Office of financial regulation and office of insurance regulation
Which of the following types of insurance is investment based, has a level fixed premium, and a nonguaranteed cash value?
Variable whole life
What is the responsibility of the Office of Financial Regulation?
- Regulation of banks - Credit Unions - Finance Companies - Securities
What is the responsibility of the Office of Insurance Regulation?
- Licensing and certificates of authority - rates - Policy forms - Claims and solvency
An insurer must notify the consumer in writing that an investigative consumer report has been requested, within how many days of the initial request?
3 days
Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained?
3 days
Which statement below is INCORRECT regarding the type of term insurance that fits best with the applicant's needs?
An applicant who may require a larger death benefit in the future should buy convertible term insurance
What is an alien insurer?
An insurance company that is incorporated outside the United States.
Which of the following best describes annually renewable term insurance?
It is level insurance
To sell variable life insurance policies, an agent must receive all of the following EXCEPT
SEC registration
Which of the following are characteristics of term life insurance?
Temporary protection, renewability, no cash value
True or false: Longer life expectancy = lower benefit
True
The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective?
As of the application date
Decreasing term insurance is often used to
Cover a mortgage
What is children's term?
Covers all children of the insured and can be converted to a permanent policy.
Variable whole life insurance is based on what type of premium?
Level fixed
Which of the following is NOT a type of whole life insurance?
Level term
Admitted/authorized
Licensed and authorized to transact business in Florida
What does MEC mean?
Modified Endowment Contract
When one insurer buys insurance from another company to minimize the effects of catastrophic losses, they are
Reinsuring
Which of the following rules would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new life insurance
Replacement Rule
What is churning?
Replacing policies within the same company, by the same producer to generate commissions
All of the following are true regarding the federal Fair Credit Reporting Act EXCEPT
Reports may be sent to anyone who requests one
What are dividends?
Return of excess premiums; therefore, are not taxable when paid to the policyowner.
What is a conditional receipt?
The applicant may be covered as early as the date of the application
What is the cost of coverage based on for group life insurance?
The average age and ratio of men to women
What is false advertising?
- Representing an insurance policy as a share of stock - Misleading or being deceptive
Within how many days after receiving a written communication of replacement must an existing insurer provide a policyowner with a policy summary?
10 days
An annuity contract is issued to a senior consumer over age 65. What is the maximum surrender charge for a withdrawal of money allowed on this annuity?
10%
The minimum age for purchasing life insurance policy is Florida is
15
How long does the law require agents to maintain records of transactions pertaining to premium payments?
3 Years
How long is the required grace period in life insurance policies issued in this state?
30 days
How many days' notice must an insurer provide to an insured regarding the lapse of a policy due to outstanding loans?
30 days
What degree felony will an agent be charged with if found guilty of aiding?
3rd degree
If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply?
5 Days
Policy loan requests, except for loan requests for payment of due premiums, may be deferred for a period of up to
6 Months
An individual has been diagnosed with Alzheimer's disease. He is insured under a life insurance policy with the accelerated benefits rider. Which of the following is true regarding taxation of the accelerated benefits?
A portion of the benefit up to a limit is tax free the rest is insurable income
Which of the following types of policies would NOT be subject to Florida regulations on life insurance solicitation?
Annuities
Which of the following products will protect an individual from outliving their money?
Annuity
Which of the following is the basic source of information used by the company in the risk selection process?
Application
When agents, brokers, or solicitors handle premiums for an insurer, they are acting in which capacity?
As a fiduciary
Which of the following is true regarding pure life annuity settlement option?
It provides the highest monthly benefit
Which of the following statements about the reinstatement provision is true?
It requires the policyowner to pay the premiums with interest before the policy is reinstated
An insured buys a 5-year level premium term policy with a face amount of $10,000. The policy also contains renewability and convertibility options. When the insured renews the policy in 5 years, what will happen to the premium?
It will increase because the insured will be 5 years older than when the policy was originally purchased
An insured purchased a life policy in 2010 and died in 2020. The insurance discovers at that time that the insured had misstated information about her insurance history on the application. What will the insurer do?
Pay the death benefit
How does accidental death affect the death benefit?
Pays double or triple indemnity if accidental death occurs within 90 days of accident
Which insurance has no cash value?
Term insurance
An agent who knowingly misrepresents material information for the purpose of inducing an insured to lapse, forfeit, change or surrender a lie insurance policy or annuity has committed an illegal practice known as
Twisting
In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe?
Unilateral
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?
Universal Life - Option A
All of the following could qualify as a group for the purpose of purchasing group life insurance EXCEPT
An associated formed 1 year ago
A loss resulting from which of the following would qualify for the accidental death rider coverage?
An automobile accident
An applicant knowingly fails to communicate information that would help an underwriter make a sound decision regarding coverage. This is an example of
Concealment
Which statement is NOT true regarding a policy summary?
It must be combined with a sales illustrations
All of the following statements regarding the Life Insurance Policy Summary are correct EXCEPT
It must illustrate all guaranteed policy dividend values
All of the following statements regarding the life insurance policy summary are correct EXCEPT
It must illustrate all guaranteed policy dividend values
An insured has a life insurance policy in the amount of $250,000 naming his wife as beneficiary. Upon his death his beneficiary decides not to receive the death benefit for some time. When she finally receives the death benefit check, if it's in the amount of $250,530. Is any portion of the proceeds that the beneficiary receives taxable?
No, the proceeds from a life insurance policy are not taxable
On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are
Not taxable since the IRS treats them as a return of a portion of the premium paid
Which nonforfeiture option provides coverage for the longest period of time?
Reduced paid-up
Which of the following is a permissible reason for an insurance company to contest payment of a claim based on statements in an application?
The application contains material misstatements
Who does the spendthrift clause in a life insurance policy protect?
The beneficiary
Which if NOT true about beneficiary designations?
The beneficiary must have insurable interest in the insured
All of the following are consideration in an insurance policy EXCEPT
The cash value in the policy
Who does the common disaster clause protect?
The contingent beneficiary
True or false: If an insured skips a premium on a universal life policy, the missing premium may be deducted from the policy's cash value. The policy will NOT lapse
True
True or false: In a life settlement option, the owner sells an existing life policy to a third party.
True
Who can make a fully deductible contribution to a traditional IRA?
An individual not covered by an employer-sponsored plan who has earned income
What is a MEC?
An overfunded life insurance policy = failed the 7-pay test.
Group life policies are usually issued as what type of coverage?
Annually renewable term
Which term is the purest form of term insurance?
Annually renewable term (ART)
Which of the following indicates the person upon whose life annuity income amount is determined?
Annuitant
Which of the following statements describes one of the reasons individuals purchase life insurance?
It creates an immediate estate
During replacement of life insurance, a replacing insurer must do which of the following?
Obtain a list of all insurance policies that will be replaced
What is life income?
Provides an income the beneficiary cannot outlive
Which of the following dates must be contained in a policy summary?
The date the summary was signed
The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?
The death benefit can be increased by providing evidence of insurability
An applicant for an agent's life only license must complete a minimum of how many hours prelicensing education?
40
To attain fully insured status under Social Security, an individual must have earned how many credits?
40
An insurer recently collected information from a senior consumer and used that information to make recommendations regarding insurance transactions. For how many years must this information be maintained after the transaction has been completed?
5 years
An applicant for a life agent's license may obtain a temporary license for a maximum period of
6 months
Which of the following is NOT true regarding the Life with guaranteed minimum annuity settlement option?
It does not guarantee that the entire principal amount will be paid out
All of the following are true regarding an Ordinary Straight Life policy EXCEPT
It does not have a guaranteed death benefit
When replacing life insurance, the duties of the replacing insurance company include all of the following EXCEPT
Obtaining a copy of the Notice Regarding Replacement and all sales proposals used for at least 5 years
According to applicants in the same class and life expectancy, which of the following factors can be used to determine premium rates?
Occupation
Under a pure life annuity, an income is payable by the company
Only for the life of the annuitant
A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as
Survivor protection
What is spouse/other insured?
Term rider that is limited time and coverage; usually expires when spouse turns 65.
What is replacement practice?
Terminating an existing policy or letting it lapse, and obtaining a new one.
True or false: During the accumulation period, funds are paid INTO the annuity. During the annuity period, funds are paid OUT to the annuitant.
True
True or false: IRA distributions are taxable and Roth IRA distributions are NOT taxable.
True
Which of the following best describes life annuity with period certain option?
It guarantees benefit payments for life of the annuitant and for a specified period for the beneficiary.
Why is an equity indexed annuity considered to be a fixed annuity?
It has a guaranteed minimum interest rate
Which of the following best describes annually renewable term insurance?
It is level term insurance
Which of the following is TRUE of level term insurance?
It is temporary protection
What is the most common name for a single policy that is designed to insure two or more lives with a standard premium and that pays the death benefit upon the first death?
Joint Life
Your client wants to provide a retirement income for his elderly parents in case something happens to him. He wants to make sure that both beneficiaries are guaranteed an income for life. Which settlement option should this policyowner select?
Joint and Survivor
Which of the following best defines the unfair trade practice of rebating?
Offering an inducement of something of value not specified in the policy
Which statement best describes agreement as it relates to insurance contracts?
One party accepts the exact terms of the other party's offer
When are policy loans available?
Only in policies that have cash value (Whole life)
Which dividend option will increase the death benefit?
Paid-up additions
A participating insurance may do which of the following?
Pay dividends to the policyowner
A participating insurance policy may do which of the following?
Pay dividends to the policyowner
All of the following statements about mutual insurance companies are correct except
Policy dividends issued by mutual companies are guaranteed and not taxable.
An annuity would normally be purchased by an individual who wants to
Provide income for retirement
When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to
Purchase a single premium policy for a reduced face amount
The guaranteed insurability rider allows the owner to purchase additional amounts of life insurance without proof of insurability at all of the following EXCEPT
Purchase of a new home
What form of the annuity settlement options provides payments to an annuitant for the rest of the annuitant's life and ceases at the annuitant's death?
Pure life
J's Retirement plan meets all federal requirements and entitles him to certain tax benefits as the owner of the plan. What term best describes j's retirement plan?
Qualified
What happens to the death benefit in terms of accelerated benefit?
Reduced by the amount paid plus earnings lost by the insurer
What Florida Insurance regulation established an outline of appropriate and inappropriate business behavior for life insurance agents?
The code of ethics of the Florida association of insurance and financial advisors
In group insurance who receives the master contract?
The employer
All of the following are true of group life insurance EXCEPT
The insureds each own their own contract
A paid-up nonforfeiture benefit will become effective as specified in the policy, unless the person entitled elects another available option within how many days after the due date of the premium in default?
60
An insured purchased a life policy in 2010 and died in 2020. The insurance company discovers at that time that the insured had misstated information about her insurance history on the application. What will the insurer do?
Pay the death benefit
What type of insurance is whole life?
Permanent protection and accumulates cash
What are the elements of a legal contract?
1. Agreement 2. Consideration 3. Competent parties 4. Legal purpose
What are the elements of a policy summary that must be included?
1. premium 2. Cash Value 3. Dividend 4. Surrender value and death benefit
What is an extended term option?
Is the automatic nonforfeiture option; same face amount, shorter term of coverage.
When are nonforfeiture options triggered?
By policy surrender or lapse
When are settlement options triggered?
By the insured's death or age 100
What is cash in a settlement option?
Lump-sum payment; usually not taxable
When is decreasing term purchased?
Mortgage or other debts
What is a unilateral contract?
Only one of the parties to the contract is legally bound to do anything.
What does adhesion mean?
Only one party prepares the contract; the other party must accept it as it is
What type of term insurance is increasing?
Return of premium
What does family term rider mean?
Spouse and children
What is representations?
Statements believed to be true to the best of one's knowledge.
Of the whole life policies, which policy will have the lowest annual premium?
Straight Life
What is the absolute assignment?
The complete permanent transfer of ownership rights; collateral assignments is the partial and temporary transfer of rights.
What does mode mean?
The frequency that the premium is paid
which of the following entities is considered the principal?
The insurer issuing a policy
What is consideration?
The insurer's promise to pay for losses
What is the investor-owned life insurance (IOLI)?
Third-party investor who has no insurable interest in the insured initiates a transaction to transfer ownership rights.
True or false: Lump-sum cash payment of life policy proceeds are tax free for the beneficiary.
True
True or false: Policy loans from cash value are NOT income taxable
True
True or false: Shorter life expectancy = higher benefit
True
True or false: The premium rates on a joint life policy are determined by averaging the ages of both insureds.
True
True or false: Under life-income (straight life) settlement option, the recipient cannot outlive the benefit payments.
True
What is reduced paid-up insurance?
Uses cash value as a single premium to purchase a permanent policy with a reduced face amount.
Which insurance provides the greatest amount of coverage for the lowest premium
Term Insurance
What is the benefit adjustable life?
Term and permanent coverage
All of the following information about the applicant is identified in the General Information section of a life insurance application EXCEPT
Education
Joe moved last year and forgot to notify the Department of his change of address. He was charged with a $250 fine. This year Joe moves again, and again forgets to notify the Department within the required time. What is his penalty this time?
A minimum fine of $500 or suspension or revocation of his license.
Which of the following best describes an insurance company that has been formed under the laws of this state?
Domestic
What is accumulation at interest?
Insurer keeps the dividend in an account where it accumulates interest.
What is waiver of monthly deductions?
Waives the cost of insurance in the event of the insured's disability
For a contract to be enforceable by law, the purpose of the contract must be
legal and not against public policy
What is twisting?
Misrepresentation which persuades an insured/owner to cancel, lapse, or switch policies from one to another
If an insurance company issues a policy even though some questions on the application were unanswered, when can the insurer get the answers to those questions?
Never; the insurer has waived its right to those answers by issuing the policy
What is conversion?
No evidence of insurability within usually 30 or 31 days of termination.
