Life Insurance Exam pt 2

In which distribution system must the potential client take the initiative and respond to an advertisement through a telephone or mail contact with the insurer? a)Direct response system b)Managing general agent system c)Home service system d)Direct agency system

a)Direct response system

The automatic premium loan provision is activated at the end of the a)Grace period. b)Free-look period c)Elimination period. d)Policy period.

a)Grace period.

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.

A set of legal or regulatory conditions that affect an insurer's ability to collect premiums commensurate with the level of risk incurred would be considered a(n): a)Legal hazard. b)Underwriting gamble. c)Legal peril. d)Fiduciary risk.

a)Legal hazard.

Regarding the taxation of Business Overhead policies, a)Premiums are deductible, and benefits are taxed. b)Premiums are not deductible, and benefits are taxed. c)Premiums are not deductible, but benefits are deductible. d)Premiums are not deductible, but expenses paid are deductible.

a)Premiums are deductible, and benefits are taxed.

Every long-term care insurer in California must submit to the Commissioner a list of all agents or other insurer representatives authorized to solicit individual consumers for the sale of long-term care insurance. These submitted agent lists must be updated at least a)Semiannually b)Monthly c)Quarterly d)Annually

a)Semiannually

All of the following are true regarding a decreasing term policy EXCEPT a)The payable premium amount steadily declines throughout the duration of the contract. b)The death benefit is $0 at the end of the policy term. c)The contract pays only in the event of death during the term and there is no cash value. d)The face amount steadily declines throughout the duration of the contract.

a)The payable premium amount steadily declines throughout the duration of the contract.

Which of the following statements regarding deferred compensation funds is INCORRECT? a)They are usually qualified plans. b)They can be established by employers. c)They can be made with cash deposits to an annuity. d)They generally provide additional retirement benefits.

a)They are usually qualified plans.

What is the penalty for excessive contributions to an IRA? a)4% b)6% c)10% d)15%

b)6%

A long stretch of national economic hardship causes a 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 change? a)Inflation Rider b)Cost of Living Rider c)Value Adjustment Rider d)Return of Premium Rider

b)Cost of Living Rider

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

The clause that protects the proceeds of a life insurance policy from creditors after the death of the insured is known as the a)Beneficiary protection clause. b)Spendthrift clause. c)Benefit protection clause. d)Incontestability clause.

b)Spendthrift clause.

All of the following are true of key person insurance EXCEPT a)The key employee is the insured. b)The plan is funded by permanent insurance only. c)There is no limitation on the number of key employee plans in force at any one time. d)The employer is the owner, payor and beneficiary of the policy.

b)The plan is funded by permanent insurance only.

An agent is a legal person who acts on behalf of a)Himself/herself. b)The principal. c)The applicant. d)The beneficiary.

b)The principal.

What is the purpose of the California laws regulating production agencies? a)They are mainly concerned with standardizing policies. b)To provide protection for the clients by requiring producers to maintain professional standards of conduct c)Avoid unnecessary federal regulation d)All of these

b)To provide protection for the clients by requiring producers to maintain professional standards of conduct

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)Representation b)Adhesion c)Consideration d)Good faith

c)Consideration

Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value? a)Insured's annual expenses. b)Effect of inflation on income over time. c)Predicted needs of the family after the insured's death. d)Insured's current and future income.

c)Predicted needs of the family after the insured's death.

All of the following are the responsibilities of every long-term care insurer in California EXCEPT a)Establish marketing procedures to assure excessive insurance is not sold or issued. b)Submit to the Commissioner a list of all agents authorized to solicit individual consumers for the sale of long-term care insurance. c)Provide enough business to solicit long-term care insurance. d)Establish marketing procedures to assure that any comparison of policies will be fair and accurate.

c)Provide enough business to solicit long-term care insurance.

A group of 15 skydivers met at a seminar and began talking about life insurance during a break. Because it was expensive to get individual life insurance, they decided to band together to form a small group so that they could qualify for group life insurance. After they applied for group life insurance, they were rejected. Why? a)There are not enough people in the group to qualify for group life insurance. b)The group has not been established for long enough. c)The purpose of the group was to purchase life insurance. d)Their profession poses too high of a risk for the insurer.

c)The purpose of the group was to purchase life insurance.

Which of the following is NOT a goal of risk retention? a)To increase control of claim reserving and claims settlements b)To fund losses that cannot be insured c)To minimize the insured's level of liability in the event of loss d)To reduce expenses and improve cash flow

c)To minimize the insured's level of liability in the event of loss

In a survivorship life policy, when does the insurer pay the death benefit? a)Half at the first death, and half at the second death b)If the insured survives to age 100 c)Upon the last death d)Upon the first death

c)Upon the last death

Every individual life insurance policy must provide for a free-look provision that lasts for at least a)30 days. b)60 days. c)90 days. d)10 days.

d)10 days.

In an annuity, the accumulated money is converted into a stream of income during which time period? a)Payment period b)Amortization period c)Conversion period d)Annuitization period

d)Annuitization period

An insurer wants to begin underwriting procedures for an applicant. What source will it consult for the majority of its underwriting information? a)Interviews b)State records c)Medical records d)Application

d)Application

A tax-sheltered annuity is a special tax-favored retirement plan available to a)Anyone. b)Certain age groups only. c)Certain groups depending on factors such as race, gender, and age. d)Certain groups of employees only.

d)Certain groups of employees only.

Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation? a)Needs approach b)Blackout approach c)Lump-sum approach d)Human life value approach (HLVA)

d)Human life value approach (HLVA)

Which of the following must be disclosed in all advertisements and policies of term life insurance for individuals 55 years of age or older? a)Life insurance surrender cost index b)MIB report c)Life insurance policy illustrations d)Insurance monetary value index

d)Insurance monetary value index

Death benefits payable to a beneficiary under a life insurance policy are generally a)Subject to income taxation by the Federal Government. b)Exempt from income taxation if under $10,000. c)Exempt from income taxation if over $10,000. d)Not subject to income taxation by the Federal Government.

d)Not subject to income taxation by the Federal Government.

Which nonforfeiture option provides coverage for the longest period of time? a)Extended term b)Paid-up option c)Accumulated at interest d)Reduced paid-up

d)Reduced paid-up

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.

The premiums paid by the employer in a business life insurance policy are a)Tax deductible by the employee. b)Always taxable to the employee. c)Never taxable to the employee. d)Tax deductible by the employer.

d)Tax deductible by the employer.

In general terms, IRA contributions are a)Deducted based on the income level. b)Never tax deductible. c)Partially tax deductible depending on the income level. d)Tax deductible.

d)Tax deductible.

Which of the following is NOT true regarding the annuitant? a)The annuitant's life expectancy is taken into consideration for the annuity. b)The annuitant receives the annuity benefits. c)The annuitant must be a natural person. d)The annuitant cannot be the same person as the annuity owner.

d)The annuitant cannot be the same person as the annuity owner.

All of the following are TRUE statements regarding the accumulation at interest option EXCEPT a)The annual dividend is retained by the company. b)The interest is credited at a rate specified by the policy. c)The policyholder has the right to withdraw the accumulations at any time. d)The interest is not taxable since it remains inside the insurance policy.

d)The interest is not taxable since it remains inside the insurance policy.

Which of the following determines the cash value of a variable life policy? a)The company's general account b)The policy's guarantees. c)The premium mode d)The performance of the policy portfolio

d)The performance of the policy portfolio

What is a wrongful act or the violation of someone's rights that leads to legal liability called? a)Hazard b)Peril c)Loss d)Tort

d)Tort