Life Insurance - Exam Questions

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

Adjusted to the insureds age at the time of renewal

All of the following would be considered rebating except?

An agent misrepresents policy benefits to convince a policyowner to replace policies

All of the following applicants for an insurance producer license are exempt from pre-licensing education requirements except?

An applicant for a dealer's license

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?

An endowment policy

All of the following are examples of third-party ownership of a life insurance policy except?

An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan

Under which of the following circumstances would an insurer pay accelerated benefits?

An insured is diagnosed with cancer and needs help paying for her medical treatment

If an insurance company makes a statement that its policies are guaranteed by the existence of the insurance guaranty association, that would be considered?

An unfair trade practice

The death benefit protection component of Universal Life insurance is always?

Annually renewable term

Because an agent is using stationery with the logo of an insurance company, applicants for insurance assume that the agent is authorized to transact on behalf of that insurer. What type of agent authority does this describe?

Apparent

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

Which of the following is not and enrollment period for a Medicare Part A applicants?

Automatic enrollment

The risk management technique that is used to prevent a specific loss by not exposing oneself to that activity is called?

Avoidance

Which of the following best describes fixed-period settlement option?

Both the principal and interest will be liquidated over a selected period of time

Which of the following would describe a legal document which would dictate who can buy a deceased partner's share of a business and for what amount?

Buy-sell agreement

Which of the following statements concerning a buy-sell agreement is true?

Buy-sell agreements are normally funded with a life insurance policy

If the commissioner has not approved or disapproved any insurance form by the end of the judgment period, the insurer

Can assume the form is approved

What does "liquidity" refer to in a life insurance policy?

Cash values can be borrowed at any time

A business owner was trying to obtain a bank loan to fund the purchase of a new business facility, but the bank required proof of additional assets to secure the loan. The business owner then decided to use her $250,000 life insurance policy to secure the loan. Which provision makes this possible?

Collateral Assignment

Which of the following is a requirement that must be satisfied before an applicant can receive an insurance producer license in Alabama?

Complete pre-licensing classroom instruction, unless otherwise exempt by the commissioner

Term policies are available as Level, Increasing, and Decreasing. Which policy component fluctuates depending on the policy type?

Death Benefit

All of the following are features and requirements of the Living Needs Rider except?

Diagnosis must indicate that death is expected within 3 years

All of the following statements concerning dividends are true except?

Dividend amounts are guaranteed in the policy

Which of the following best describes an insurance company that has been formed under the laws of this state?

Domestic

When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount?

Equal to the original policy for as long as the cash values will purchase

Which of the following is not a type of information that needs to be gathered in order to determine the value of someone's life when using the needs approach?

Estimated longevity

Items stipulated in the contract that the insurer will not provide coverage for are found in the

Exclusions clause

What does "level" refer to in level term insurance?

Face amount

Which policy component decreases in decreasing term insurance?

Face amount

What is the period when, should the insured die prematurely, the surviving spouse will have dependent children to support?

Family dependency period

An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming?

Foreign

Which of the following choices best describes the blackout period?

From the youngest child's age 16 until surviving spouse's age 60

What required provision protects against unintentional policy lapse?

Grace Period

Mortality - Interest + Expense =

Gross premium

An association could buy group insurance for its members if it meets all of the following requirements except?

Has at least 50 members

An individual purchased a life insurance policy on his life naming his wife as primary beneficiary, and their daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?

If the primary beneficiary predeceases the insured

Life income joint and survivor settlement option guarantees

Income for 2 or more recipetents

What type of insurance would be used for a return of premium rider?

Increasing term

A long stretch of national economic hardship causes a 7% rate of inflation. A policy owner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change?

Inflation rider

Which of the following statements is an accurate comparison between private and government insurers?

Insurance provided by the government is called federal insurance

The life insurance policy clause the prevents an insurance company from denying payment of a death claim after a specified period of time is known as the?

Insuring clause

What is the benefit of choosing extended term as a nonforfeiture option?

It has the highest amount of insurance protection

Which of the following is not true regarding certificate of authority?

It is issued to group insurance participants

Which of the following applies to the 10-day free-look privilege?

It permits the insured to return the policy for a full refund of premiums paid

Which of the following is true regarding a single life settlement option?

It provides income the beneficiary can not outlive

An insured buys a 5-year level premium term policy with a face amount of $100,000. The policy also contains renewability and convertibility options. When the insured renews the policy in five years

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

Kayla's husband died in a plane crash. She needs a new source of funding that will help put her child through daycare. Which of the following would be the best source? a. estate conservation b. life insurance proceeds c. state education waiver d. viatical settlement

Life Insurance proceeds

Insurance is a contract by which one seeks to protect another from

Loss

What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war while serving in the military?

Military service or war

If a life insurance policy develops cash value faster than a seven-pay whole life contract, it is

Modified endowment contract

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?

Modified life

After a back injury, and insured is disabled for a year. His insurance policy carries a Disability income benefit rider. which of the following benefits will he receive?

Monthly premium wavier and monthly incomw

A long term care insurance shoppers guide must be provided in the format developed by which of the following?

NAIC

What was created to keep telemarketers from calling consumers who do not wish to be contacted?

National Do Not Call Registry

Your client uses $50,000 in inheritance money to purchase a single premium immediate annuity. How soon can he begin receiving income payments?

No later than 1 year from the time of purchase

A rider attached to a life insurance policy that provides coverage on the insureds family members is called the?

Other-Insured rider

Which option is being utilized when the insurer accumulates dividends and interest and then uses the accumulated dividends, plus interest, and policy cash value to pay the policy up early?

Paid-Up option

A participating insurance policy may do which of the following?

Pay dividends to the policyowner

Which of the following riders would not cause the death benefit to increase?

Payor benefit rider

If the policy owner, the insured, and the beneficiary under a life insurance policy are three different people, who has the ownership rights?

Policyowner

Under a disability income policy, the insurer does not pay a monthly benefit that is equal to the insured's previous income. The reason for paying a benefit amount that is less than the insured's income is to?

Prevent overutilization and malingering

Which of the following answers does NOT describe the principal goal of a preferred provider organization?

Provide medical services only from physicians in the network

Which of the following is the most common way to transfer risk?

Purchase Insurance

The failure of an authorized insurer to file its annual financial statement with the Commissioner when due may result in any of the following actions by the Commissioner except?

Requesting an audit

What part of the Internal Revenue Code allows an owner of a life insurance policy or annuity to exchange or replace their current contract with another contract without creating adverse tax consequences?

Section 1035 Policy Exchange

Which two terms are associated directly with the way an annuity is funded?

Single payment or periodic payments

Events in which a person has both a chance of winning or losing are classified as?

Speculative risk

The clause that protects the proceeds of a life insurance policy from creditors after the death of the insured is known as the

Spendthrift clause

All of the following would be different between qualified and nonqualified retirement plans except?

Taxation on accumulation

Which of the following policies would not have a policy loans provision?

Term Life

Which of the following entities established the Do-Not-Call-Registry

The Federal Trade Commission

Which of the following entities was created to protect the insureds against an insurer's insolvency?

The Life and Disability Insurance Guaranty Association

Which of the following will not be covered under an individual health insurance policy?

The applicants house help

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then

The benefit is received tax free

Which of the following is incorrect concerning a noncontributory group plan?

The employees receive individual policies

Which of the following would not fall into the category of costs associated with death?

The expense of a vacation for surviving family members

An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is incorrect?

The insured may choose to convert to term or permanent individual coverage

An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible?

The insured will need a written consent of the insurer

According to the regulations of life insurance policy solicitation, what two documents must be presented to an applicant during the application process?

The policy summary and the buyer's guide

An individual applies for a life policy. Two years ago he suffered a head injury from an accident, so he cannot remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history one year later. What will probably happen?

The policy will not be affected

The owner of a life insurance policy wishes to name two beneficiaries for the policy proceeds. What will the soliciting insurance producer say?

The policyowner can specify the way proceeds are split in the policy

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

The policyowner cannot skip premiums without the policy lapsing.

The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident, It was determined that the accident was his fault. The triple indemnity rider in the 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

Group life insurance is a single policy written to provide coverage to members of group. Which of the following statements concerning group life is correct?

100% participation of members is required in non-contributory plans

A policyowner cancels his life policy but instructs the insurance company to transfer the cash value of his policy to an annuity. This nontaxable transaction is called?

1035 Exchange

If a new individual long-term care policyholder is not satisfied with a new policy, within how many days can the insured return the policy for a full premium refund?

30 days

If an application for an annuity is gathered any way other than face-to-face, within how many days after the insurer receives the completed application must the applicant be given a Buyer's Guide?

5 business days

A straight Life policy has what type of premium?

A level annual premium for the life of he insured

All of the following are characteristics of a group life insurance plan except?

There is a requirement to prove insurability on the part of the participants

What is the purpose of settlement options?

They determine how death proceeds will be paid

All of the following are required for life insurance illustrations except?

They must be part of the contract

Why should the producer personally deliver the policy when the first premium has already been paid?

To help the insured understand all aspects of the contract

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

To keep the policy in force

What is the purpose of a fixed-period settlement option?

To provide a guaranteed income for a certain amount of time

If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it?

Unilateral

The Wavier of Cost insurance is found in what type of insurance?

Universal Life

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

Universal Life

What kind of policy allows withdrawals or partial surrenders?

Universal life

What is the name of the insured who enters into a viatical settlement?

Viator

An absolute assignment is a

transfer of all ownership rights in a policy