Life Insurance

Any licensed person whose activities affect interstate commerce and who knowingly makes false material statements related to the business of insurance may be imprisoned up to how long?

10 years

Some deferred annuities include an adjustment that subjects the owner of an annuity to share in all loss or gain due to a premature liquidation of bonds.

A Market Value Adjusted Annuity.

An applicant knowingly fails to communicate information that would help an underwriter make a sound decision regarding coverage. This is an example of...

Concealment

Hazards

Conditions or situations that increase the probability of an incurred loss happening.

A person who assists another in soliciting, negotiating, or placing insurance or annuities on behalf of an insurer or a person seeking insurance or annuities is called an

Intermediary

Why is an equity indexed annuity considered to be a fixed annuity?

It has a guaranteed minimum interest rate.

The following documents must be provided to the policy owner or applicant during policy replacement:

Notice Regarding Replacement

Gross Annual Premium

One year cost for mortality, plus expense loading.

Unilateral Contract

Only one of the parties to the contract is bound to do anything. The insured makes no legally binding promises. However, an insurer is legally bound to pay losses covered by a policy in force.

Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance?

Replacement Rule. Anytime a new policy is issued that replaces or modifies existing insurance, a replacement form must be submitted to the ceding company.

Who has the legal title of the property in a trust?

Trustee

When would a 20-pay whole life policy endow?

When the insured reaches age 100.

When must an insurer provide a policy summary?

When the policy is delivered. The insurer must provide a policy summary at the time of policy delivery only if the insurer does not provide a basic illustration.

What is the purpose of establishing the target premium for a universal life policy?

To keep the policy in force.

The Waiver of Cost of Insurance rider is found in what type of insurance?

Universal Life

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

Increasing Term

An agent is presumed to have exceeded the occasional exchange of business if the agent places more than how many insurance risks per calendar year with all insurers?

25

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

The insurer must maintain copies of all signed illustrations for at least how many years after the policy is no longer in force?

3 years

If the annuitant dies during the accumulation period, who will receive the annuity benefits?

Beneficiary

Consideration

Binding force in any contract. Consideration is something of value that each party gives to the other. The consideration on the part of the insured is the payment of premium and the representations made in the application. The consideration on the part of the insurer is the promise to pay in the event of loss.

Which entity regulates variable life policies?

Both State Department and the Insurance Department.

What limits the amount that a policy owner may borrow from a whole life insurance policy?

Cash value.

Fraternal Benefits Society

Organization formed to provide insurance benefits for members of an affiliated lodge, religious organization, or fraternal organization with a representative form of government. Fraternal sells only to its members and are deemed charitable organizations, and not insurers. They are not subject to all of the regulations that apply to the insurers that provide insurance to the public at large.

For an individual who is NOT covered by an employer-sponsored plan, IRA contributions are...

Tax deductible

Employer contributions made to a qualified plan

are subject to vesting requirements.

The paid-up addition uses the addition...

to purchase a smaller amount of the same type of insurance as the original policy.

Mike is the owner of a $100,000 life policy with a triple indemnity rider for accidental death. When Mike is killed in a car accident, it is determined that the accident was his fault. The triple indemnity rider in Mike's policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive?

$100,000

The Commissioner issues an order without holding a hearing. The person aggrieved by this order demands a hearing shortly after receiving the order. The hearing must be held within a maximum of how many days?

60 days

Apparent Authority

Appearance or the assumption of authority based on the actions, words, or deeds of the principle or because of circumstances the principle granted.

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.

Payment of Premium Clause

Clause that allows for life insurance premiums to be paid in advance.

A rider that may be attached to a life insurance policy that will adjust the face amount based upon a specific index, such as the Consumer Price Index, is called

Cost of Living Rider

Under a defined benefit retirement plan, who determines what benefits a retired employee will receive?

Employer

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.

An applicant wants to buy a life insurance policy in which there's a guaranteed minimum benefits. Which type should he buy?

Fixed.

Because of the imposed blackout period, the surviving spouse will not receive benefits until

He/she qualifies for retirement benefits.

Return of Premium (RoP)

Increasing term life insurance policy that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid.

An intermediate's license remains in effect for how long?

Indefinitely

Your client's employer does not offer a company-wide annuity contract. What type of annuity contract should your client obtain?

Individual

Twisting

Misrepresentation, incomplete, or fraudulent comparison of insurance policies that persuades an insured/owner, to his or her detriment, to cancel, lapse, or switch policies. Twisting is prohibited.

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year she didn't receive a check from the insurer. From what type of insurer did the insured purchase the policy?

Mutual

Human Life Value Apporoach

Projection of insurance needs that's based upon the capitalization of an applicant's future earnings. It's determined by the loss of income that would result with the death of the insured, after making adjustments for expenses, inflation,...etc

The Gramm - Leach - Bliley Act was passed to

Protect private customer information filed with a financial institution.

What type of insurer uses a formal sharing agreement?

Reciprocal insurers

An agent submitted an application for life insurance for a client. No premium was submitted with the application. When the agent tried to deliver the policy, he found out that the client had suffered a heart attack since the application was taken. The agent should...

Return the policy to the insurer.

During the accumulation period in a non-qualified annuity, what are the tax consequences of a withdrawal?

Taxable income will be withdrawn 1st and the 10% penalty will be imposed if under age 59 1/2.

An annuitant dies before the effective date of a purchased annuity. Assuming the annuitant's wife is the beneficiary, what will happen?

The interest will continue to accumulate tax deferred.

The policy owner of a Universal Life policy may skip paying the premium and the policy will not lapse as long as....

The policy contains sufficient cash value to cover the cost of insurance.

An insured stops making payments on a loan taken from his cash value policy. What will most likely happen?

The policy will terminate when the loan amount with interest equals or exceeds the cash value.

If a deferred annuity is surrendered prematurely, a surrender charge is imposed. How is the surrender charge determined?

The surrender charge is a percentage of the cash value and decreases over time.

What kind of policy allows withdrawals or partial surrenders?

Universal Life

What type of life insurance policy allows the policy owner to pay more or less than the planned premium?

Universal Life

The insurer must be able to rely on the statements in the application and the insured must be able to rely on the insurer to pay valid claims. In the forming of a insurance contract, this is referred to as...

Utmost Good Faith

In forming an insurance contract, when does acceptance usually occur?

When an insurer approves a prepaid application.

If an insured receives accelerated death benefits, what is the least amount of the original death benefit that the beneficiary would receive after the insured's death?

0%

The insurer decided to cancel an insurance policy prior to its expiration due to non-payment of premium. When can cancellation take place?

10 days after the notice was delivered to the policyholder.

If reasonably possible, a notice of proof of loss claim must be provided to the insurer within what period of time after the time required by the policy?

12 months

A Universal Life insurance policy has 2 types of interest rate:

Guaranteed and Current

What is the special significance of a conditional receipt?

It is intended to provide coverage on a date earlier than the date of the issuance of the policy.

When a reduced paid-up non-forfeiture option is chosen, what happens to the face amount of the policy?

It is reduced to the amount of what the cash value would buy as a single premium.

Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die?

Joint Life

Variable Life insurance is based on what kind of premium?

Level Fixed.

An insured has had a life policy that was purchased 3 years ago when the insured was 40 years old. The insured was killed in a car accident and it is discovered that the insured is actually 45 years old and not 43, as stated on the application. What will the insurer do?

Pay a reduced death benefit. The incontestability clause prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years. However, the clause does not apply to age, sex and identity.

Retention

Planned assumption of risk by an insured through the use of deductibles, co-payments, or self-insurance. It's also known as self-insurance when the insured accepts the responsibility for the loss before the insurance company pays. The purpose of retention is: 1) Reduce expenses & improve cash flow. 2) Increase control of claim reserving & claims settlements. 3) To fund for loses that can't be insured.

Insurers and intermediaries must provide a copy of the current edition of the Wisconsin Buyer's Guide to Annuities and a Preliminary Contract Summary at what points?

Prior to accepting the applicant's initial premium.

Single Life Settlement Option

Provides income for a single beneficiary for the rest of their life. Upon the death of the beneficiary, the payments stop.

The Fair Credit Reporting Act

Purpose is to protect consumers against the circulation of inaccurate or obsolete information, ensure that consumer reporting agencies are fair and equitable in consumer treatment.

Eddie submitted a application for life insurance without paying the premium. The application was approved, and now the agent is delivering the policy. What should the agent have Eddie sign?

Statement of Good Health

When replacing a policy, an insurer must maintain a file containing copies of all statements for how long?

5 years

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

50%

If a person violates an order specifically issued to him/her, that person may be required to pay a fine up to how much?

$1,000. Each day the violation continues is considered a separate offense.

A policy owner cancels his life policy but instructs the insurance company the cash value of his policy to an annuity. What is this nontaxable transaction called?

1035 Exchange

An insurer terminates an agent's appointment. Within how many days of termination must the intermediary be notified?

15 days

Any person who violates an insurance statute or rule of Wisconsin can be imprisoned for up to how many years?

3 years and fined up to $5,000. A corporation can be fined up to $10,000.

A claim is considered overdue if NOT paid within how many days after the insurer receives written notice?

30 days

If a consumer requests additional information concerning a Investigative Consumer Report, how long does the insurer or reporting agency have to comply?

5 days

A claimant who is totally and permanently disabled, is eligible for Social Security Disability benefits after an elimination period of

5 months

According to the rule of readability of insurance policies in Wisconsin , what is a required minimum score on the Flesch reading ease test for Medicare supplement policies?

50

An IRA uses immediate annuities to pay out benefits; the IRA owner is nearly 75 years old when he decides to collect distributions. What kind of penalty would the IRA owner pay?

50% tax on the amount not distributed as required.

A policy will pay the death benefits 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

What company produces evaluations of insurer financial status often used by the insurance department?

AM Best

What documentation grants express authority to an agent?

Agent's Contract with the principle.

An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe?

Aleatory. In an aleatory contract, unequal amounts are exchanged between payments and benefits. In this instance, the insured receives a large benefit for a small price.

A client doesn't mind paying a higher premium as long as he gets a life insurance policy with a faster cash value growth. Which policy is best?

An endowment policy.

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

An individual not covered by an employer-sponsored plan who has earned income.

Fixed Period Annuity Settlement Option

Annuitant selects the time period for the benefits. The insurer determines how much each payment will be. This option pays for a specific amount of time only, and there are no life contingencies.

Rebating

Any inducement offered to the insured in the sale of insurance products that is not specified in the policy.

Implied Authority

Authority that is not expressed or written into the contract, but which the agent is assumed to have in order to transact the business of insurance for the principle.

Universal Life - Option B

Death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases. At any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value.

Universal Life - Option A

Death benefit remains level while the cash value gradually increases. The death benefit will increase at a later date in order to maintain a gap between the cash value and the death benefit before the policy matures.

Wilma owns a policy in which she is covered as the bread-winner with permanent insurance and with decreasing term insurance in the form of a rider. Wilma owns a...

Family Income Policy

Jay is receiving fixed amount benefit payments from his late wife's insurance policy. He was told that if he dies before all of the benefits are paid, the remaining amount will go to the contingent beneficiary. Which settlement option did Jay choose?

Fixed Amount

A couple near retirement is planning for their golden years. They want to make sure that their retirement annuity provides monthly benefits for the rest of their lives. Should one of them die, the other would still like to continue to receive benefits. Which settlement option should they choose?

Joint and Survivor

What is another name for the accumulation period of an annuity?

Pay-in period

Life Settlement Broker

Person who, for compensation, solicits, negotiates, or offers to negotiate a life settlement contract. Life Settlement Brokers represent only the policyowners.

In insurance, an offer is usually made when...

The application is submitted.

When a fixed annuity owner pays his/her insurance company a monthly annuity premium, where is the money placed?

The insurance company's general account.

What is the effect of negotiations for a contract?

The time when a statement made by an insured can affect the insurer's obligations.

What is the purpose of the buyer's guide?

To allow the consumer to compare the costs of different policies.