life insurance exam part 1

What type of premium do both Universal Life and Variable Universal Life policies have? A Increasing B Flexible C Level fixed D Decreasing

B. Flexible

A Return of Premium term life policy is written as what type of term coverage? A Decreasing B Renewable C Level D Increasing

D. INcreasing

Which two terms are associated directly with the way an annuity is funded? A Increasing or decreasing B Immediate or deferred C Renewable or convertible D Single payment or periodic payments

D Single payment or periodic payments

Most agents try to collect the initial premium for submission with the application. When an agent collects the initial premium from the applicant, the agent should issue the applicant a A Statement of good health. B Backdated receipt. C Warranty. D Premium receipt.

D. Premium receipt

A Return of Premium term life policy is written as what type of term coverage? A Renewable B Level C Increasing D Decreasing

c. increasing

Which of the following best defines target premium in a universal life policy? A The minimum amount to make sure the policy is annually renewable B The corridor of insurance C The recommended amount to keep the policy in force throughout its lifetime D The maximum amount the policyowner may pay on a policy

C The recommended amount to keep the policy in force throughout its lifetime

Variable Whole Life insurance is based on what type of premium? A Increasing B Flexible C Graded D Level fixed

D. Level fixed

Which statement is NOT true regarding a Straight Life policy? A It has the lowest annual premium of the three types of Whole Life policies. B Its premium steadily decreases over time, in response to its growing cash value. C The face value of the policy is paid to the insured at age 100. D It usually develops cash value by the end of the third policy year.

B Its premium steadily decreases over time, in response to its growing cash value.

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following? A Contract of adhesion B Acceptance C Consideration D Legal purpose

C Consideration

Upon policy delivery, the producer may be required to obtain any of the following EXCEPT A Payment of premium. B Delivery receipt. C Signed waiver of premium. D Statement of good health.

C Signed waiver of premium.

An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristic does this describe? A Aleatory B Unilateral C Conditional D Contingent

C Conditional

A Universal Life Insurance policy is best described as a/an A Annually Renewable Term policy with a cash value account. B Variable Life with a cash value account. C Whole Life policy with two premiums: target and minimum. D Flexible Premium Variable Life policy.

A Annually Renewable Term policy with a cash value account.

What is the purpose of the buyer's guide? A To allow the consumer to compare the costs of different policies B To provide the name and address of the agent/producer issuing the policy C To list all policy riders D To provide information about the issued policy

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

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 types of policies allows for a flexible premium and a variable investment component? A Variable universal life insurance B Guaranteed issue variable life insurance C Variable whole life insurance D Whole life insurance

A Variable universal life insurance

In forming an insurance contract, when does acceptance usually occur? A When an insurer's underwriter approves coverage B When an insurer delivers the policy C When an insurer receives an application D When an insured submits an application

A When an insurer's underwriter approves coverage

Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe? A Personal B Adhesion C Unilateral D Conditional

B Adhesion

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 option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early? A Accumulation at Interest B Paid-up additions C Dividend Accumulation option D Paid-up option

D Paid-up option

Level term insurance provides a level death benefit and a level premium during the policy term. If the policy renews at the end of a specified period of time, the policy premium will be A Discounted. B Adjusted to the insured's age at the time of renewal. C Determined by the health of the insured. D Based on the issue age of the insured.

B Adjusted to the insured's age at the time of renewal.

The LEAST expensive first-year premium is found in which of the following policies? A Level Term B Annually Renewable Term C Increasing Term D Decreasing Term

B Annually Renewable Term

Which of the following best describes the aleatory nature of an insurance contract? A Policies are submitted to the insurer on a take-it-or-leave-it basis B Exchange of unequal values C Only one of the parties being legally bound by the contract D Ambiguities are interpreted in favor of the insured

B Exchange of unequal values

An applicant signs an application for a $25,000 life insurance policy, pays the initial premium, and receives a conditional receipt. If the applicant dies the following day, which of the following is TRUE? A The beneficiary will receive the full death benefit if it is determined that the applicant qualified for the policy. B The premium would be returned to the insured's estate because the policy was not issued. C The death claim will be rejected. D The application will be voided.

A The beneficiary will receive the full death benefit if it is determined that the applicant qualified for the policy.

The premium of a survivorship life policy compared with that of a joint life policy would be A As high. B Half the amount. C Lower. D Higher.

C. Lower

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

A couple owns a life insurance policy with a Children's Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability? A Medical exam and parents' medical history B Proof of insurability is not required. C Medical exam D Her parents' federal income tax receipts

B Proof of insurability is not required.

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.

A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this? A Level term B Term to specified age C Ordinary life policy D Limited pay whole life

A. Level term

A Universal Life Insurance policy is best described as a/an A Flexible Premium Variable Life policy. B Annually Renewable Term policy with a cash value account. C Variable Life with a cash value account. D Whole Life policy with two premiums: target and minimum.

B Annually Renewable Term policy with a cash value account.

If an agent wishes to sell variable life policies, what license must the agent obtain? A Adjuster B Surplus Lines C Personal Lines D Securities

D Securities

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

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? A Joint Life B Decreasing Term C Whole Life D Ordinary Life

A. Joint life

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 TRUE regarding the accumulation period of an annuity? A It is also referred to as the annuity period. B It is a period of time during which the beneficiary receives income C It is limited to 10 years. D It is a period during which the payments into the annuity grow tax deferred.

D It is a period during which the payments into the annuity grow tax deferred.

If an annuitant dies before annuitization occurs, what will the beneficiary receive? A Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount B Either the amount paid into the plan or the cash value of the plan, whichever is the lesser amount C Amount paid into the plan D Cash value of the plan

A Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount

A lucky individual won the state lottery, so the state will be sending him a check each month for the next 25 years. What type of annuity products are they likely to use to provide these benefits? A Variable annuity B Flexible payment annuity C Deferred interest annuity D Immediate annuity

D. Immediate annuity

Which is the appropriate action by the insurer if a prospective insured submitted an incomplete application? A Return the application to the applicant for completion B Issue a policy anyway since the application has been submitted C Ask the producer who solicited the policy to complete and resign the application D Fill in the blanks to the best of the insurer's knowledge

A Return the application to the applicant for completion

The insurer discovered that one of the applicants for life insurance missed a couple of questions on the application. What must the insurer do with the application? A Return to the applicant for completion B Answer the missed questions for the applicant C Acknowledge the missed questions with a signature and continue the policy issue process D Proceed with issuing a policy

A Return to the applicant for completion

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 types of annuities will generally provide the highest monthly income? A Installment refund B Life with a 10-year period certain C Straight life D Joint and survivor

C Straight life

Which of the following is a generic consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process? A Policy Summary B Illustrations C Buyer's Guide D Insurance Index

C. Buyers guide

Which of the following reports will provide the underwriter with the information about an insurance applicant's credit? A Agent's report B Any federal report C Consumer report D Inspection report

C. Consumer report

Which policy component decreases in decreasing term insurance? A Dividend B Premium C Face amount D Cash value

C. Face amount

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? A It will remain the same for the new 5-year term. B It will decrease for the new 5-year term since the insured is now a lesser risk to the company. C It will increase each year during the next 5 years as the face amount increases each year. D It will increase because the insured will be 5 years older than when the policy was originally purchased.

D It will increase because the insured will be 5 years older than when the policy was originally purchased.

An annuity owner is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that will equal the performance of the Standard and Poor's 500 Index. She would likely purchase a(n) A Equity Indexed Annuity. B Variable Annuity. C Flexible Annuity. D Immediate Annuity.

A Equity Indexed Annuity.

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

Which Universal Life option has a gradually increasing cash value and a level death benefit? A Term insurance B Option B C Option A D Juvenile life

C Option A

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change? A The death benefit can be increased by providing evidence of insurability. B The death benefit cannot be increased. C The death benefit can be increased only when the policy has developed a cash value. D The death benefit can be increased only by exchanging the existing policy for a new one.

A The death benefit can be increased by providing evidence of insurability.

Which of the following best details the underwriting process for life insurance? A Selection, classification, and rating of risks B Solicitation, negotiation and sale of policies C Issuance of policies D Reporting and rejection of risks

A. Selection, classification, and rating of risks

Which of the following is TRUE regarding variable annuities? A A person selling variable annuities is required to have only a life agent's license. B The annuitant assumes the risks on investment. C The funds are invested in the company's general account. D The company guarantees a minimum interest rate.

B The annuitant assumes the risks on investment.

When is the earliest a policy may go into effect? A After the underwriter reviews the policy B When the application is signed and a check is given to the agent C When the first premium is paid and the policy has been delivered D When the insurer approves the application

B When the application is signed and a check is given to the agent

Which of the following is a short-term annuity that limits the amounts paid to a specific fixed period or until a specific fixed amount is liquidated? A Refund life B Variable annuity C Annuity certain D Fixed annuity

C Annuity certain

Which type of life insurance policy generates immediate cash value? A Decreasing Term B Continuous Premium C Single Premium D Level Term

C. Single premium

Which of the following is a risk classification used by underwriters for life insurance? A Normal B Excellent C Standard D Poor

C. Standard

Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe? A Conditional B Personal C Adhesion D Unilateral

C. adhesion

The death protection component of Universal Life Insurance is always A Whole Life B Adjustable Life C Decreasing Term D Annually Renewable Term

D Annually Renewable Term

Which of the following statements is correct regarding a whole life policy? A The policyowner is entitled to policy loans. B Cash values are not guaranteed. C The policy premium is based on the attained age. D The death benefit may increase or decrease during the policy period.

A The policyowner is entitled to policy loans.

The annuitant dies while the annuity is still in the accumulation stage. Which of the following is TRUE? A The money will continue to grow tax-deferred until the liquidation period, and then will be paid to the beneficiary. B The beneficiary will receive the greater of the money paid into the annuity or the cash value. C The owner's estate will receive the money paid into the annuity. D The insurance company will retain the cash value and pay back the premiums to the owner's estate.

B The beneficiary will receive the greater of the money paid into the annuity or the cash value.

Which of the following is the basic source of information used by the company in the risk selection process? A Agent's report B Warranty C Consumer report D Application

D. Application

Which of the following individuals must have insurable interest in the insured? A Beneficiary B Underwriter C Producer D Policyowner

D. Policy owner

Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income? A Annuitization period B Pay-out period C Liquidation period D Depreciation period

D Depreciation period

All of the following statements about equity index annuities are correct EXCEPT A The annuitant receives a fixed amount of return. B They have a guaranteed minimum interest rate. C The interest rate is tied to an index such as the Standard & Poor's 500. D They invest on a more aggressive basis aiming for higher returns.

A The annuitant receives a fixed amount of return.

An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-year term? A The insured may renew the policy for another 10 years at the same premium rate. B The insured may renew the policy for another 10 years, but at a higher premium rate. C The insured must provide evidence of insurability to renew the policy. D The insured may only convert the policy to another term policy.

B The insured may renew the policy for another 10 years, but at a higher premium rate.

Which policy component decreases in decreasing term insurance? A Dividend B Premium C Face amount D Cash value

C Face amount

The main difference between immediate and deferred annuities is A The number of insureds. B The amount of each payment. C When the income payments begin. D How the annuity is purchased.

C When the income payments begin.

An insured purchased a variable life insurance policy with a face amount of $50,000. Over the life of the policy, stock performance declined and the cash value fell to $10,000. If the insured dies, how much will be paid out? A $10,000 B $40,000 C $50,000 D $60,000

C. $50,000

Which of the following documents delivered to the policyowner includes information about premium amounts, cash values, surrender values and death benefits for specific policy years? A A privacy notice B A buyer's guide C A policy summary D A notice regarding replacement

C. A policy summary

The death benefit under the Universal Life Option B A Decreases by the amount that the cash value increases. B Increases for the first few years of the policy, and then levels off. C Remains level. D Gradually increases each year by the amount that the cash value increases.

D Gradually increases each year by the amount that the cash value increases.

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 principal amount will be paid out.

All of the following are true about variable products EXCEPT A The minimum death benefit is guaranteed. B The cash value is not guaranteed. C Policyowners bear the investment risk. D The premiums are invested in the insurer's general account.

D The premiums are invested in the insurer's general account.

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

Which of the following features of the Indexed Whole Life policy is NOT fixed? A Cash value growth B Premium C Death benefit D Policy period

A Cash value growth

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

Which of the following statements is TRUE about a policy assignment? A It transfers rights of ownership from the owner to another person. B It is the same as a beneficiary designation. C It permits the beneficiary to designate the person to receive the benefits. D It authorizes an agent to modify the policy.

A It transfers rights of ownership from the owner to another person.

When an annuity is written, whose life expectancy is taken into account? A Annuitant B Beneficiary C Life expectancy is not a factor when writing an annuity. D Owner

A. Annuitant

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

What kind of policy allows withdrawals or partial surrenders? A 20-pay life B Term policy C Variable whole life D Universal life

D. Universal life

The minimum interest rate on an equity indexed annuity is often based on A The returns from the insurance company's separate account. B The annuitant's individual stock portfolio. C The insurance company's general account investments. D An index like Standard & Poor's 500.

D An index like Standard & Poor's 500.

A Return of Premium term life policy is written as what type of term coverage? A Renewable B Level C Increasing D Decreasing

C Increasing

All of the following are requirements for life insurance illustrations EXCEPT A They must identify nonguaranteed values. B They must differentiate between guaranteed and projected amounts. C They must be part of the contract. D They may only be used as approved.

C They must be part of the contract.

In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports? A They provide additional information from an outside source about a particular risk. B They provide information about a customer's character and reputation. C The customer has no knowledge of this action. D The customer's associates, friends, and neighbors provide the report's data.

D The customer's associates, friends, and neighbors provide the report's data.

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 Unidirectional B Aleatory C Conditional D Unilateral

D Unilateral

When would a 20-pay whole life policy endow? A At the insured's age 65 B After 20 payments C In 20 years D When the insured reaches age 100

D When the insured reaches age 100

In which of the following cases will the insured be able to receive the full face amount from a whole life policy? A As soon as the cash value exceeds the face amount B If there are no named beneficiaries when the policy is paid up C At age 65 D If the insured lives to age 100

D If the insured lives to age 100

What are the two components of a universal policy? A Insurance and investments B Mortality cost and interest C Separate account and policy loans D Insurance and cash account

D Insurance and cash account

Which of the following best describes the aleatory nature of an insurance contract? A Ambiguities are interpreted in favor of the insured B Policies are submitted to the insurer on a take-it-or-leave-it basis C Exchange of unequal values D Only one of the parties being legally bound by the contract

C Exchange of unequal values

Languages: English Español Chapter: Completing the Application, Underwriting, and Delivering the Policy Question 12 of 15 In classifying a risk, the Home Office underwriting department will look at all of the following EXCEPT A Applicant's present physical condition. B Applicant's present occupation. C Applicant's past income. D Applicant's past medical history.

C Applicant's past income.

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 Second-to-Die B Family Income Policy C Joint Life Policy D Survivorship Life Policy

C Joint Life Policy

Which of the following is NOT true about a joint and survivor annuity benefit option? A This option guarantees income for two or more recipients. B The surviving annuitant may receive reduced payments. C Payments stop after the first death among the annuitants. D A period certain option may be included.

C Payments stop after the first death among the annuitants.

A Straight Life policy has what type of premium? A A variable annual premium for the life of the insured B A level annual premium for the life of the insured C An increasing annual premium for the life of the insured D A decreasing annual premium for the life of the insured

B A level annual premium for the life of the insured