Life Insurance
A licensee who ceases to maintain residency in North Carolina is required to deliver any insurance licenses to the Commissioner by mail or in person within how many days after terminating residency? a) 10 days b) 21 days c) 30 days d) 90 days
c) 30 days
For how long is an insurance company allowed to defer policy loan requests? a) 30 days b) 60 days c) 6 months d) 1 year
c) 6 months
Which of the following is NOT true regarding policy loans? a) An insurer can charge interest on outstanding policy loans. b) A policy loan may be repaid after the policy is surrendered. c) Money borrowed from the cash value is taxable. d) Policy loans can be repaid at death.
c) Money borrowed from the cash value is taxable.
A rider attached to a life insurance policy that provides coverage on the insured's family members is called the a) Juvenile rider. b) Payor rider. c) Other-insured rider. d) Change of insured rider
c) Other-insured rider.
Annuities can be used to fund which of the following? a) Group life insurance b) Estate creation c) Retirement plans d) Variable life insurance
c) Retirement plans
To sell variable life insurance policies, an agent must receive all of the following EXCEPT a) A securities license. b) A life insurance license. c) SEC registration. d) FINRA registration.
c) SEC registration
Under an extended term nonforfeiture option, the policy cash value is converted to a) A lower face amount than the whole life policy. b) A higher face amount than the whole life policy. c) The same face amount as in the whole life policy. d) The face amount equal to the cash value.
c) The same face amount as in the whole life policy.
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit? a) Equity Indexed Universal Life b) Variable Universal Life c) Universal Life - Option A d) Universal Life - Option B
c) Universal Life - Option A
Which of the following is a key distinction between variable whole life and variable universal life products? a) Variable whole life allows policy loans from the cash value. b) Variable universal life has a fixed premium. c) Variable whole life has a guaranteed death benefit. d) Variable universal life is regulated solely through FINRA.
c) Variable whole life has a guaranteed death benefit.
An insured decides to surrender his $100,000 Whole Life policy. The premiums paid into the policy added up to $15,000. At policy surrender, the cash surrender value was $18,000. What part of the surrender value would be income taxable? a) $50,000 b) $18,000 c) $15,000 d) $3,000
d) $3,000 The difference between the premiums paid and the cash value would be taxable. In this example, the difference between the premiums paid ($15,000) and the cash value ($18,000) is $3,000.
All of the following are Nonforfeiture options EXCEPT a) Cash surrender b) Extended term c) Reduced paid-up d) Interest only
d) Interest only
Which of the following best describes a misrepresentation? a) Making a deceptive or untrue statement about a person engaged in the insurance business b) Making a maliciously critical statement that is intended to injure another person c) Discriminating among individuals of the same insuring class d) Issuing sales material with exaggerated statements about policy benefits
d) Issuing sales material with exaggerated statements about policy benefits
A couple receives a set amount of income from their annuity. When the wife dies, the husband no longer receives annuity payments. What type of annuity did the couple buy? a) Joint and survivor b) Life with period certain c) Joint limited annuity d) Joint life
d) Joint life
Which Universal Life option has a gradually increasing cash value and a level death benefit? a) Juvenile life b) Term insurance c) Option B d) Option A
d) Option A
Which of the following has the right to convert the existing term coverage to permanent insurance? a) Insurer b) Beneficiary c) Producer d) Policyowner
d) Policyowner
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? a) Reinstatement rule b) Conversion rule c) Disclosure rule d) Replacement rule
d) Replacement rule
To sell variable life insurance policies, an agent must receive all of the following EXCEPT a) FINRA registration. b) A securities license. c) A life insurance license. d) SEC registration.
d) SEC registration.
A domestic insurer issuing variable contracts must establish one or more a) Liability accounts. b) Annuity accounts. c) General accounts. d) Separate accounts.
d) Separate accounts.
The paid-up addition option uses the dividend a) To purchase a one-year term insurance in the amount of the cash value. b) To reduce the next year's premium. c) To accumulate additional savings for retirement. d) To purchase a smaller amount of the same type of insurance as the original policy.
d) To purchase a smaller amount of the same type of insurance as the original policy.
If an insurer becomes insolvent, which of the following would pay benefits to policyholders? a)The NAIC fund b)The State c)A federal reserve fund d)The Guaranty Association
d) the guaranty association
When does a joint and survivor life policy pay?
When the second insured dies
Insurance companies are required to provide proof of loss forms to the claimant within how many days after receipt of notice of loss? a) 15 b) 30 c) 31 d) 45
a) 15
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? a) Aleatory b) Good health c) Adhesion d) Conditional
a) 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 married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that? a) Joint Life Policy b) Survivorship Life Policy c) Second-to-Die d) Family Income Policy
a) Joint Life Policy
Which of the following is an example of a limited-pay life policy? a) Life Paid-up at Age 65 b) Renewable Term to Age 70 c) Level Term Life d) Straight Life
a) Life Paid-up at Age 65
The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been in force for at least how many years? a) 1 year b) 2 years c) 5 years d) 7 years
b) 2 years
Your customer doesn't mind paying a higher premium as long as he gets a life insurance product that would allow for a faster growth of the cash value. What kind of policy would you recommend? a) A whole life policy b) An endowment policy c) A term policy d) An annuity
b) An endowment policy Because the cash value in an endowment has to build up faster since the funds are intended to be used while the insured is alive, the premium for an endowment is considerably more expensive than an ordinary straight life policy.
An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy? a) $20,000 b) $25,000 c) $50,000 d) The face amount will be determined by the insurer.
c) $50,000
What is the maximum duration of a temporary license? a) 90 days b) 120 days c) 180 days d) 365 days
c) 180 days
Option A
the 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.
Term Life insurance
- renewable without physical exam, up to certain age - can convert to whole life, but not reverse (based on age) - Convertible term is based on current or attained age
What is universal life a combination of?
1-year renewable term and a cash value account
in a noncontributory group life plan (employer pays total premium), how many of all employees must participate?
100% of all eligible employees
how many days is conversion from a group life policy to an individual policy covered after employment is terminated?
31 days, regardless of health
Variable Universal Life
A life insurance policy that has a flexible premium and allows the policyowner to self-direct their cash values into equities
What guarantees do variable products offer?
None and are not backed by the guaranty fund
Variable whole life allows the insured to self-direct the ___________ of the _________
Cash value of the investment
cash value on a 20-pay life policy
Cash value will equal face amount at maturity
To sell variable products, an agent must be registered with _____
FINRA
Are the premiums on a universal life policy flexible and what is the guaranteed rate of return?
Flexible premiums and a minimum guaranteed rate of return
Limited Pay Whole Life
Level premiums limited to certain time period, less than life.
Is credit life used for mortgage protection?
No
does a withdraw from taking a partial surrender under a universal life insurance policy require tax on the interest?
No
Universal life insurance policies permit their owners to take ______ _______
Partial surrender
Who is the creditor on group credit life?
Policy owner and beneficiary
If the Commissioner is scheduling a hearing for a potential violation of the Insurance Code, what is the minimum required notice? a) 10 days b) 15 days c) 30 days d) 45 days
a) 10 days
Difference between universal life insurance and whole life
Universal life has a premium that is flexible
What is a life insurance policy that invests its cash values in equities known as?
Variable life
investing in variable products is considered a ____ against_____
a hedge against inflation
What is the maximum face amount on an industrial life policy? a) $1,000 b) $10,000 c) $1 million d) Unlimited
a) $1,000
What type of premium do both Universal Life and Variable Universal Life policies have? a) Decreasing b) Increasing c) Flexible d) Level fixed
c) Flexible
Whole life benefits
bundled (packaged)
Under the L&H Guaranty Association, the maximum benefit one contract holder may receive in benefits, regardless of the number of contracts held, is a) $300,000 b) $1,000,000 c) $5,000,000 d) $100,000
c) $5,000,000
How long must a complaint record be maintained? a) 7 years b) 1 year c) 3 years d) 5 years
d) 5 years
When an annuity is written, whose life expectancy is taken into account? a) Beneficiary b) Life expectancy is not a factor when writing an annuity. c) Owner d) Annuitant
d) Annuitant
Annually renewable term policies provide a level death benefit for a premium that a) Decreases annually. b) Remains level. c) Fluctuates. d) Increases annually.
d) Increases annually.
he insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPT a) The beneficiary's life expectancy. b) Projected interest rates. c) Face amount of the policy. d) The insured's age at death.
d) The insured's age at death.
What happens if a deferred annuity is surrendered before the annuitization period? a) The owner will only receive a refund of premium. b) The insurer can only apply the surrender value toward another annuity. c) Deferred annuities cannot be surrendered prior to the annuitization period. d) The owner will receive the surrender value of the annuity.
d) The owner will receive the surrender value of the annuity.
What type of policy is used to provide credit life insurance?
decreasing term
whole life policy premiums
due until the insured dies or reaches age 100
in group insurance who is usually the policy owner and what are they issued?
employer is issued the master policy
Whole life and limited pay maturity age
maturity at age 100
what can the policy limits on credit life not exceed?
policy loans cannot exceed the amount of the loan
Universal life benefits
transparent (stand alone)
limited pay whole life policies mature when?
when the insured reaches age 100
Straight or traditional whole life
Has a level premium and will provide coverage until the insured dies or reaches age 100
After appointing an agent, how long does an insurer have to file with the Commissioner a notice of appointment? a) 15 days b) 30 days c) 45 days d) 60 days
a) 15 days
After appointing an agent, how long does an insurer have to file with the Commissioner a notice of appointment? a) 15 days b) 30 days c) 45 days d) 60 days
a) 15 days
In insurance, an offer is usually made when a) An applicant submits an application to the insurer. b) The insurer approves the application and receives the initial premium. c) The agent hands the policy to the policyholder. d) An agent explains a policy to a potential applicant.
a) An applicant submits an application to the insurer.
A viatical settlement is arranged between a viatical company and a/an a) Lender. b) Terminally ill insured. c) Insurance producer. d) Beneficiary.
b) Terminally ill insured.
Which of the following must an insurer obtain in order to transact insurance within a given state? a) Certificate of authority b) Producer's certificate c) Business entity license d) Insurer's license
a) Certificate of authority For all insurers
What is another name for interest-sensitive whole life insurance? a) Current assumption life b) Variable life c) Term life d) Adjustable life
a) Current assumption life
An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation? a) Decreasing term b) Variable life c) Universal life d) Whole life
a) Decreasing term
A licensee decides to terminate his residency in this state. Which of the following would be an appropriate action? a) Delivering the license to the Commissioner within 30 days b) Allowing the license to expire c) Notifying the NAIC d) Notifying the Commissioner within 10 days
a) Delivering the license to the Commissioner within 30 days
The Commissioner has the power to examine and investigate the affairs of every insurance institution or agent doing business in North Carolina to determine which of the following? a) If the insurer remains solvent and conducts business in compliance with state laws and regulations. b) If the insurer stays active and conducts certain percent of business annually. c) If the insurer has engaged in solicitations that include advertising and illustrations. d) If the insureds have engaged in any conduct in violation of the General Statutes.
a) If the insurer remains solvent and conducts business in compliance with state laws and regulations.
The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the a) Incontestability clause. b) Reinstatement clause. c) Insuring clause. d) Misstatement of Age clause.
a) Incontestability clause.
Which of the following best describes annually renewable term insurance? a) It is level term insurance. b) It requires proof of insurability at each renewal. c) Neither the premium nor the death benefit is affected by the insured's age. d) It provides an annually increasing death benefit.
a) It is level term insurance.
Which statement is NOT true regarding a Straight Life policy? a) Its premium steadily decreases over time, in response to its growing cash value. b) The face value of the policy is paid to the insured at age 100. c) It usually develops cash value by the end of the third policy year. d) It has the lowest annual premium of the three types of Whole Life policies.
a) Its premium steadily decreases over time, in response to its growing cash value.
Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client? a) Limited pay whole life b) Interest-sensitive whole life c) Life annuity with period certain d) Increasing term
a) Limited pay whole life Premium payments will cease at her age 65, but coverage will continue to her death or age 100.
Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? a) Option B b) Corridor option c) Variable option d) Option A
a) Option B
All of the following are true regarding insurance policy loans EXCEPT a) Policy loans can be made on policies that do not accumulate cash value. b) The amount of the outstanding loan and interest will be deducted from the policy proceeds when the insured dies. c) The policy will terminate if the loan plus interest equals or exceeds the cash value of the policy. d) Policyowners can borrow up to the full amount of their whole life policy's cash value.
a) Policy loans can be made on policies that do not accumulate cash value.
An agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. The agent is guilty of a) Rebating. b) Coercion. c) Twisting. d) Controlled business.
a) Rebating.
Children's riders attached to whole life policies are usually issued as what type of insurance? a) Term b) Variable life c) Adjustable life d) Whole life
a) Term
A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums? a) The insured's premiums will be waived until she is 21. b) The premiums will become tax deductible until the insured's 18th birthday. c) Since it is the policyowner, and not the insured, who has become disabled, the life insurance policy will not be affected. d) The insured will have to pay premiums for 6 months. If at the end of this period the father is still disabled, the insured will be refunded the premiums.
a) The insured's premiums will be waived until she is 21.
Which is true about a spouse term rider? a) The rider is usually level term insurance. b) Coverage is allowed for an unlimited time. c) The rider is decreasing term insurance. d) Coverage is allowed up to age 75.
a) The rider is usually level term insurance. The spouse term rider allows a spouse to be added for coverage. It is available for a limited amount of time, typically expiring at age 65. A spouse term rider (just like any other insured rider) is usually level term insurance.
Which of the following types of policies allows the policyowner to skip premium payments, provided that there is enough cash value in the policy to cover the premium amount? a) Universal life b) Flexible life c) Variable life d) Adjustable life
a) Universal life
The interest earned on policy dividends is a) 40% taxable, similar to a capital gain. b) Taxable. c) Nontaxable. d) Tax deductible.
b) Taxable.
The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been in force for at least how many years? a) 1 year b) 2 years c) 5 years d) 7 years
b) 2 years
Which of the following is INCORRECT regarding a $100,000 20-year level term policy? a) The policy will expire at the end of the 20-year period. b) At the end of 20 years, the policy's cash value will equal $100,000. c) The policy premiums will remain level for 20 years. d) If the insured dies before the policy expired, the beneficiary will receive $100,000.
b) At the end of 20 years, the policy's cash value will equal $100,000.
Which of the following is NOT an example of a valid insurable interest? a) Child in parents' lives b) Debtor in the life of the creditor c) Business partners in each other's lives d) Employer in key employee's life
b) Debtor in the life of the creditor
Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid a) Until the policyowner's age 100, when the policy matures. b) For 20 years or until death, whichever occurs first. c) Until the policyowner reaches age 65. d) For at least 20 years.
b) For 20 years or until death, whichever occurs first.
According to the nonforfeiture law, if the owner decides to surrender a deferred annuity prior to annuitization, the owner is entitled to which of the following? a) Full premium refund without any charges b) Guaranteed surrender value c) No payments d) Annuity dividends
b) Guaranteed surrender value
As a field underwriter, a producer is responsible for all of the following tasks EXCEPT a) Obtain appropriate signatures on the application for insurance. b) Issue the policy that is requested. c) Help prevent adverse selection. d) Solicit business that will fall within the insurer's underwriting guidelines.
b) Issue the policy that is requested.
Which of the following is correct regarding credit life insurance? a) It has a maximum term of 20 years. b) It insures the life of a debtor. c) It is purchased on an installment basis. d) It insures the life of a creditor.
b) It insures the life of a debtor.
If a life insurance policy increases significantly in face amount (death benefit) when the insured reaches a specified age, what type of policy is this? a) Single premium policy b) Jumping juvenile policy c) Limited pay whole life policy d) Modified life insurance policy
b) Jumping juvenile policy While many policies provide a level death benefit, Jumping Juvenile policies provide a low face amount in the early years and then increase, usually by 5 times the amount, when the insured reaches an age specified in the policy (usually age 21).
Which of the following riders would NOT cause the Death Benefit to increase? a) Accidental Death Rider b) Payor Benefit Rider c) Guaranteed Insurability Rider d) Cost of Living Rider
b) Payor Benefit Rider
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? a) Joint and survivor b) Pure life c) Life with guaranteed minimum d) Installment refund
b) Pure life A Pure Life Annuity has the potential for providing the maximum income per dollar of premium if the annuitant lives beyond their life expectancy. However, if the annuitant dies before his or her life expectancy, and before the total benefit has been paid out, payments cease and there is no refund of payments to survivors.
In order to get a nonresident license in North Carolina an agent must a) Surrender their license in their state of residence. b) Submit the request for licensure in the form prescribed by the Commissioner and pay the applicable fees. c) Pass the nonresident state exam and satisfy continuing education requirements. d) Represent an agency located is this state.
b) Submit the request for licensure in the form prescribed by the Commissioner and pay the applicable fees.
Which of the following is NOT true regarding the annuitant? a) The annuitant must be a natural person. b) The annuitant cannot be the same person as the annuity owner. c) The annuitant's life expectancy is taken into consideration for the annuity. d) The annuitant receives the annuity benefits.
b) The annuitant cannot be the same person as the annuity owner.
An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT? a) The premium for individual coverage will be based upon the insured's attained age. b) The insured may choose to convert to term or permanent individual coverage. c) The insured would not need to prove insurability for a conversion policy. d) The insured may convert coverage to an individual policy within 31 days.
b) The insured may choose to convert to term or permanent individual coverage. When group coverage is converted to an individual policy, the insurer will determine the type of coverage, usually permanent insurance.
An employee quits his job on May 15 and doesn't convert his Group Life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. Which of the following statements best describes what will happen? a) The insurer will pay nothing because the employee has terminated his group insurance and hasn't started the individual one. b) The insurer will pay the full death benefit from the group policy to the beneficiary. c) The insurer will pay a reduced death benefit to the beneficiary. d) The insurer will pay the death benefit minus one month's premium.
b) The insurer will pay the full death benefit from the group policy to the beneficiary. The employee usually has a period of 31 days after terminating from the group in order to exercise the conversion option. During this time, the employee is still covered under the original group policy.
All of the following are true about variable products EXCEPT a) Policyowners bear the investment risk. b) The premiums are invested in the insurer's general account. c) The minimum death benefit is guaranteed. d) The cash value is not guaranteed.
b) The premiums are invested in the insurer's general account.
n an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT a) The amount of insurance. b) The type of investment. c) The length of coverage. d) The premium.
b) The type of investment. Typically, the owner of an adjustable life policy has the following privileges: increasing or decreasing the premium, changing the premium-paying period, increasing or decreasing the face amount of coverage, or changing the period of protection.
When the breadwinner that is insured by a Family Policy dies, what rights are provided to other family members that are covered under the policy? a) They can surrender the coverage for its cash value. b) They can convert their coverage to permanent life insurance without evidence of insurability. c) They can convert their coverage to permanent life insurance with evidence of insurability. d) Family members are not provided any rights.
b) They can convert their coverage to permanent life insurance without evidence of insurability.
When a licensee is accused of any act, omission, or misconduct that would subject the licensee to a license suspension or revocation, with the approval of the Commissioner, the license may be surrendered for a period of a) 1 year. b) Time to be set by the Commissioner. c) 90 days. d) 6 months.
b) Time to be set by the Commissioner.
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? a) Conditional b) Unilateral c) Unidirectional d) Aleatory
b) Unilateral
Which of the following Life Insurance policies would be considered interest sensitive? a) Increasing term b) Universal life c) Adjustable life d) Whole life
b) Universal life
Stating that an insurer's policies are guaranteed by the existence of the Life and Health Guaranty Association is a) Only required of some lines of insurance. b) Permitted. c) An unfair trade practice. d) Mandatory.
c) An unfair trade practice.
All of the following are requirements of eligibility for Social Security disability income benefits EXCEPT a) Fully insured status. b) Waiting period of 5 months. c) Being age 65. d) Inability to perform any gainful work.
c) Being age 65. The life-income option, also known as straight life, provides the recipient with an income that he or she cannot outlive. It pays the benefit while the beneficiary is alive; however, the payments stop at the beneficiary's death.
A key person insurance policy can pay for which of the following? a) Workers compensation b) Hospital bills of the key employee c) Costs of training a replacement d) Loss of personal income
c) Costs of training a replacement
All of the following describe the purpose of the North Carolina regulations governing the solicitation of life insurance EXCEPT a) Improve the buyer's understanding of the basic features of the policy. b) Improve the ability of the buyer to evaluate the relative costs of similar life plans. c) Educate the buyer about policy protection by the Guaranty Association. d) Require insurers to deliver information to applicants to improve their ability to select the most appropriate kind of life insurance.
c) Educate the buyer about policy protection by the Guaranty Association.
Which of the following is NOT a characteristic of universal life insurance? a) Flexible death benefit b) Cash account c) Fixed premium d) Unbundled premium
c) Fixed premium
A Universal Life insurance policy has two types of interest rates that are called a) Fixed and Variable. b) Minimum and Target. c) Guaranteed and Current. d) Option A and Option B.
c) Guaranteed and Current.
All of the following entities regulate variable life policies EXCEPT a) The SEC. b) The Insurance Department. c) The Guaranty Association. d) Federal government.
c) The Guaranty Association.
Which of the following is TRUE about nonforfeiture values? a) A table showing nonforfeiture values for the next 10 years must be included in the policy. b) Policyowners do not have the authority to decide how to exercise nonforfeiture values. c) They are required by state law to be included in the policy. d) They are optional provisions.
c) They are required by state law to be included in the policy.
If a licensee is convicted of a criminal violation, the licensee's insurance license is a) Automatically revoked. b) Not affected. c) Suspended after a hearing. d) Automatically suspended.
d) Automatically suspended.
What license or licenses are required to sell variable annuities? a) Only a life insurance license b) Only a securities license c) No license is required d) Both a life insurance license and a securities license
d) Both a life insurance license and a securities license
Which of the following statements concerning buy-sell agreements is true? a) Premiums paid are deductible as a business expense. b) Benefits received are considered income taxable. c) Buy-sell agreements pay in the event of a medical emergency. d) Buy-sell agreements are normally funded with a life insurance policy.
d) Buy-sell agreements are normally funded with a life insurance policy.
Which of the following types of insurance policies is most commonly used in credit life insurance? a) Increasing term b) Whole life c) Equity indexed life d) Decreasing term
d) Decreasing term Credit insurance is a special type of coverage written to insure the life of the debtor and pay off the balance of a loan in the event of the death of the debtor. It is usually written as decreasing term insurance.
What type of whole life insurance policy has premiums that are adjusted so that during the first years of the policy, the premiums are lower than those of a straight whole life policy, and in subsequent years the premiums are higher than those of a straight whole life policy? a) Indexed life b) Indeterminate premium c) Enhanced life d) Modified life
d) Modified life Modified life is a permanent policy, but in the early years, the premiums are similar to that of a term policy; in later years, the premiums are increased to build cash values and cause the policy to endow.
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 is provided. Which policy provision allows this? a) Waiver of premium provision b) Incontestable clause c) Grace period d) Reinstatement provision
d) Reinstatement provision
An Adjustable Life policyowner can change which of the following policy features? a) The mortality expense b) The investment account c) The insured d) The coverage period
d) The coverage period Typically, the owner of an adjustable life policy has the following privileges; increasing or decreasing the premium; changing the premium-paying period; increasing or decreasing the face amount of coverage; or changing the period of protection.
The policyowner of a Universal Life policy may skip paying the premium and the policy will not lapse as long as a) The previous premium payments were high enough to create an excess of premium. b) The policyowner cannot skip premiums without the policy lapsing. c) The next month's premium is sufficient to cover both the current premium amount and the skipped amount. d) The policy contains sufficient cash value to cover the cost of insurance.
d) The policy contains sufficient cash value to cover the cost of insurance.
An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's 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? a) Adjustable life b) Term life c) Limited pay d) Universal life
d) Universal life
A single premium policy has ____ cash value
immediate
When is a survivorship life policy typically used?
in estate planning so the death benefit of the policy can be used to pay estate taxes when due
are group or individual policies more expensive?
individual policies
What happens to the premium and face amount on an annual renewable level term policy?
premium will increase every year and face amount will stay the same
how many employees must enroll in a contributory group life insurance policy?
75% eligible employees
What must whole life policies include?
A table showing their guaranteed cash value at the end of each year for the first 20 years
What is a universal life policy that has an investment component called?
Variable universal life
When does survivorship life pay?
When surviving insured dies
When does a joint life policy pay?
When the first insured dies
Are loans allowed on universal life policies?
Yes
Will adjusting the premium paid on an adjustable whole life policy affect the face amount?
Yes
Which of the following is NOT a mandatory provision in a life insurance contract? a) 5% minimum interest paid on cash value b) Misstatement of age or sex c) 31-day grace period d) 2-year incontestability period
a) 5% minimum interest paid on cash value
The Commissioner reports any violations of insurance laws and regulations to the a) Attorney General. b) Guaranty Association. c) Governor. d) NAIC.
a) Attorney General.
How is the Commissioner of Insurance selected for the office? a) Elected in a general election for a 4-year term b) Elected by authorized insurers for a 2-year term c) Appointed by the Governor for a 4-year term d) Appointed by the General Assembly for a 2-year term
a) Elected in a general election for a 4-year term
A young father would like a life insurance policy to provide coverage for all five family members at the lowest cost. Which type of policy would he most likely buy? a) Family Protection Policy b) Universal Life Policy c) Family Income Policy d) Level Term Policy
a) Family Protection Policy
Which is TRUE about the cash surrender nonforfeiture option? a) Funds exceeding the premium paid are taxable as ordinary income. b) After the cash surrender, the insured is covered for a grace period of one month. c) The policy remains active for some time after the policyholder opts for cash surrender. d) The policyholder receives the original cash value of the policy.
a) Funds exceeding the premium paid are taxable as ordinary income
Which of the following is TRUE about nonforfeiture values? a) They are required by state law to be included in the policy. b) They are optional provisions. c) A table showing nonforfeiture values for the next 10 years must be included in the policy. d) Policyowners do not have the authority to decide how to exercise nonforfeiture values.
a) They are required by state law to be included in the policy.
In a survivorship life policy, when does the insurer pay the death benefit? a) Upon the last death b) Upon the first death c) Half at the first death, and half at the second death d) If the insured survives to age 100
a) Upon the last death
When would a 20-pay whole life policy endow? a) When the insured reaches age 100 b) At the insured's age 65 c) After 20 payments d) In 20 years
a) When the insured reaches age 100
Nonforfeiture Values
are required by state law to be included in the policy, and cannot be altered by the policyowner. A table showing the nonforfeiture values for the next 20 years must be included in the policy.
In cases when an applicant for insurance is blind or deaf, the insurer underwriting the policy may do which of the following? a) Limit the amount or type of coverage available to the applicant. b) Apply the same standards as are used for applicants whose sight and hearing are not impaired. c) Charge a different rate for the same coverage based on increased risk. d) Refuse to insure the applicant because of adverse risk.
b) Apply the same standards as are used for applicants whose sight and hearing are not impaired.
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? a) Adhesion b) Consideration c) Good faith d) Representation
b) Consideration
Which of the following entities is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization? a) Reciprocal association b) Fraternal benefit society c) Mutual company d) Stock company
b) Fraternal benefit society
When an insurer requires a written proof of loss after notice of such loss has been given by the insured or beneficiary, the company must a) Request a police report from the Department of Motor Vehicles. b) Furnish a blank form to be used for that purpose. c) Document the request for further investigation. d) Submit the loss claim to underwriting for premium review and resolution.
b) Furnish a blank form to be used for that purpose.
What are the two components of a universal policy? a) Separate account and policy loans b) Insurance and cash account c) Insurance and investments d) Mortality cost and interest
b) Insurance and cash account
Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy? a) Premiums are taxable to the employee. b) Premiums are not tax deductible as a business expense. c) Premiums are tax deductible by the key employee. d) Premiums are tax deductible as a business expense.
b) Premiums are not tax deductible as a business expense.
An individual who sells insurance solely as a foreign military sales agent works with a a) Alien license. b) Restricted license. c) Military license. d) Temporary license.
b) Restricted license.
Under which of the following circumstances would a pretext interview be permissible? a) The insurer needs to obtain confidential information. b) The insurer suspects criminal activity and fraud. c) The applicant for insurance fails to provide pertinent information to underwriters. d) A third party is conducting the interview.
b) The insurer suspects criminal activity and fraud.
Which of the following best describes what the annuity period is? a) The period of time from the effective date of the contract to the date of its termination b) The period of time during which accumulated money is converted into income payments c) The period of time from the accumulation period to the annuitization period d) The period of time during which money is accumulated in an annuity
b) The period of time during which accumulated money is converted into income payments
Under an extended term nonforfeiture option, the policy cash value is converted to a) A higher face amount than the whole life policy. b) The same face amount as in the whole life policy. c) The face amount equal to the cash value. d) A lower face amount than the whole life policy.
b) The same face amount as in the whole life policy.
How are state Insurance Guaranty Associations funded? a) By NAIC b) By the Government c) By their members - authorized insurers d) By the Department of Insurance
c) By their members - authorized insurers
The type of policy that can be changed from one that does not accumulate cash value to the one that does is a a) Decreasing Term Policy. b) Whole Life Policy. c) Convertible Term Policy. d) Renewable Term Policy.
c) Convertible Term Policy.
Which special policy combines decreasing term insurance with whole life insurance to provide the insured's family with a monthly income upon the death of the insured, while maintaining permanent coverage until the end of the income payments? a) Family Maintenance Policy b) Survivorship Life c) Family Income Policy d) Family Protection Policy
c) Family Income Policy
If a deferred annuity is surrendered prematurely, a surrender charge is imposed. How is the surrender charge determined? a) It is a flat fee determined by the annuity owner when the annuity is purchased. b) It will increase as the accumulation period increases. c) It is a percentage of the cash value and decreases over time. d) It is always 7% of the cash value.
c) It is a percentage of the cash value and decreases over time.
Which two terms are associated directly with the way an annuity is funded? a) Immediate or deferred b) Renewable or convertible c) Single payment or periodic payments d) Increasing or decreasing
c) Single payment or periodic payments
Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated? a) Those who have dependents b) Those who have no history of claims c) Those who have been insured under the plan for at least 5 years d) Those who have worked in the company for at least 3 years
c) Those who have been insured under the plan for at least 5 years
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit? a) Equity Indexed Universal Life b) Variable Universal Life c) Universal Life - Option A d) Universal Life - Option B
c) Universal Life - Option A Universal Life Option A (Level Death Benefit option) policy must maintain a specified "corridor" or gap between the cash value and the death benefit, as required by the IRS. If this corridor is not maintained, the policy is no longer defined as life insurance for tax purposes, and consequently loses most of the tax advantages that have been associated with life insurance.
An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his a) Experience Rating. b) Group rate. c) Insurer's scheduled rate. d) Attained age.
d) Attained age.
A person who knowingly obtains information about an individual from an agent or the insurer under false pretenses has committed a(n) a) Trustworthy act. b) Unfair trade practice. c) Felony. d) Class 1 misdemeanor.
d) Class 1 misdemeanor.
Which component increases in the increasing term insurance? a) Cash value b) Interest on the proceeds c) Premium d) Death benefit
d) Death benefit
Which special policy combines decreasing term insurance with whole life insurance to provide the insured's family with a monthly income upon the death of the insured, while maintaining permanent coverage until the end of the income payments? a) Family Protection Policy b) Family Maintenance Policy c) Survivorship Life d) Family Income Policy
d) Family Income Policy
Which of the following terms best describe the coverage provided by term policies, as compared to any other form of protection? a) Least b) Most comprehensive c) Longest d) Greatest
d) Greatest
During partial withdrawal from a universal life policy, which portion will be taxed? a) Cash value b) Principal c) Loan d) Interest
d) Interest
Which of the following is NOT true regarding the Life with Guaranteed Minimum annuity settlement option? a) It is a life contingency option. b) The beneficiary receives the remainder of the principal amount upon the annuitant's death. c) Payments can be made in installments and as a single cash refund. d) It does not guarantee that the entire principal amount will be paid out.
d) It does not guarantee that the entire principle amount will be paid out
Which of the following statements is TRUE about a policy assignment? a) It is the same as a beneficiary designation. b) It permits the beneficiary to designate the person to receive the benefits. c) It authorizes an agent to modify the policy. d) It transfers rights of ownership from the owner to another person.
d) It transfers rights of ownership from the owner to another person.
f a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insured, it is called a a) Joint and survivor annuity. b) Deferred annuity. c) Pure annuity. d) Joint life annuity.
d) Joint life annuity.
A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will a) Pay the policy proceeds up to an established limit. b) Not pay the policy proceeds under any circumstances. c) Automatically pay the policy proceeds. d) Pay the policy proceeds only if it would have issued the policy.
d) Pay the policy proceeds only if it would have issued the policy.
An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called? a) 401(k) plan b) Tax-sheltered account plan c) HR 10 plan d) Profit sharing plan
d) Profit sharing plan
The annuity owner dies during the accumulation period without naming a beneficiary. Annuity's cash value exceeds premiums paid. Which of the following is TRUE? a) The premium value will be paid to the annuitant's estate. b) All benefits will be forfeited. c) The cash value will be paid to the state government. d) The cash value will be paid to the annuitant's estate.
d) The cash value will be paid to the annuitant's estate.
Which of the following is TRUE regarding an indeterminate premium whole life policy? a) The premium is lower in the first year of the policy; then it is gradually raised every year. b) The premium is level throughout the life of the policy. c) The premium is usually higher in the first few years of the policy. d) The premium can be raised up to a guaranteed maximum rate.
d) The premium can be raised up to a guaranteed maximum rate
What is the purpose of establishing the target premium for a universal life policy? a) To accumulate cash value faster b) To pay up the policy faster c) To cover all policy expenses d) To keep the policy in force
d) To keep the policy in force
What is another name for universal life insurance?
interest-sensitive whole life
Group life insurance
life insurance that provides a master policy for a group; each eligible group member receives a certificate of insurance
Level term
premium and amount of coverage are level through the term
Decreasing term
type of life insurance provided in mortgage redemption insurance
Whole life death benefits
wil pay the face amount upon death or age 100