Life Insurance Final
When a fixed annuity owner pays his/her insurance company a monthly annuity premium, where is this money placed? 1. The insurance company's general account 2. Forwarded to an investor 3. Each contract's separate account 4. The annuity owner's account
1. The insurance company's general account
The practice of making sure that the purchase of an annuity product is correct forthe purchaser's investment objectives, financial status, tax status, and needs is called 1. Suitability. 2. Field underwriting. 3. Risk classification. 4. Solicitation.
1. Suitability
Term life insurance provides 1. Temporary coverage. 2. Cash value. 3. Savings element. 4. Lifetime protection.
1. Temporary coverage.
Which of the following actions would be considered an offer? 1. An agent explaining a policy to a potential applicant 2. An applicant submitting the application 3. An insurer issuing a policy 4. An insurer's underwriter approving the application
2. An applicant submitting the application
A producer CANNOT act as an agent of an insurer without which of the following? 1. A certificate of authority 2. An appointment by the insurer 3. A signed contract 4. A posted bond
2. An appointment by the insurer
Which of the following settlement options does NOT guarantee that the entire principal will be paid out to the beneficiary? 1. Lump-sum payment 2. Life income 3. Fixed-period installments 4. Fixed-amount installments
2. Life income
An insured submits the full premium along with a completed application. Once the policy is issued, when does the coverage begin? 1. After the free-look period 2. On the date of the application 3. On the date the policy was issued 4. When the policy is received
2. On the date of the application
What is the purpose of requiring licenses for persons who transact insurance? 1. Be able to collect commissions 2. Protect the general public 3. Generate income for the Department of Insurance 4. Protect insurers from liability and lawsuits
2. Protect the general public
Which rule would apply if an insured wants to cash in an old policy and use the funds to purchase a new policy? 1. Disclosure rule 2. Reinstatement rule 3. Replacement rule 4. Conservation rule
3. Replacement rule
Which of the following falls under an agent's fiduciary responsibilities? 1. Contacting clients regarding their current coverage 2. Receiving commissions for insurance transactions 3. Notifying the Department of administrative actions against the agent 4. Submitting premiums to the insurer
4. Submitting premiums to the insurer
The cash value under a modified endowment contract (MEC) accumulates on a/an 1. LIFO basis. 2. Income-taxable basis. 3. Post-tax basis. 4. Tax-deferred basis.
4. Tax-deferred basis
Which of the following means "liquidity" in a life insurance contract? 1. The flexible premium 2. The death benefit 3. The money in a savings account 4. The cash value available to the policyowner
4. The cash value available to the policyowner
What is the main purpose of the Gramm-Leach-Bliley Act 1. Fraud prevention 2. Protection of consumers against insolvent insurers 3. Prevention of terrorism activities 4. Consumer privacy protection
Consumer privacy protection
An annuity pays a monthly amount for the remainder of the annuitant's life. If death occurs before the principal is exhausted, the remaining amount will be paid to a designated beneficiary. Which payment option has this annuitant selected? 1. Fixed-period installments 2. Refund life 3. Life only 4. Straight life
2. Refund life
A fixed annuity has a guaranteed interest rate of 4%. This means that the annuitant will 1. Always receive the current interest rate plus 4%. 2. Always receive the current interest rate adjusted for inflation. 3. Never receive more than 4% interest. 4. Never receive less than 4% interest.
3. Never receive more than 4% interest
An agent who offers a cash reward to a prospect for buying a policy is guilty of 1. Coercion. 2. Twisting. 3. Controlled business. 4. Rebating.
4. Rebating
1. The Commissioner obtains a restraining order against a person who has violated an insurance law. The person continues the violation for 15 days. The person will have to pay a fine of 1. $0 2. $1,000 3. $5,000 4. $75,000
1. $0
Which of the following policy elements remains constant in Level, Increasing and Decreasing policies? 1. Premium 2. Cash value 3. Death benefit 4. Face amount
1. Premium
Which of the following is a person who has authority to bind, or manages all or part of the assumed reinsurance business of a reinsurer and acts as an agent for the reinsurer? 1. Reinsurance manager 2. General managing broker 3. General managing agent 4. Reinsurance agent
1. Reinsurance manager
Which of the following principles describes restoring the insured to their original financial status after a loss? 1. Reasonable expectations 2. Indemnity 3. Warranty 4. Utmost good faith
2. Indemnity
The maximum number of employees allowed for a SIMPLE plan is 1. 25 2. 50 3. 100 4. 300
3. 100
The loan value of a whole life policy is limited to the policy's 1. Total premiums paid. 2. Face amount. 3. Cash value. 4. Interest accrued.
3. Cash value
All of the following are types of whole life insurance EXCEPT 1. Level term. 2. Single premium. 3. Straight life. 4. Limited payment.
3. Straight life
In life policies issued in this state, when may the insurer use suicide as a cause of death as a defense against paying a claim? 1. Under no circumstance 2. If the insured was determined to be mentally ill 3. If the insured was determined to be sane 4. If the suicide occurs during the first 2 years of coverage
4. If the suicide occurs during the first 2 years of coverage
27. Which of the following types of policies are issued by stock companies? 1. Guaranteed 2. Nonparticipating 3. Self-insured 4. Participating
4. Participating
Which of the following would be considered a senior consumer in this state? (Choose from the following options) 1. Any person age 65 or older 2. Any person who qualifies for Social Security disability benefits 3. Any person who qualifies for Medicare 4. Any person age 59 1/2 or older
1. Any person age 65 or older
In life insurance, an insurable interest between the policyowner and the insured must exist 1. At the time of application. 2. When the policy is delivered. 3. On the date specified in the policy. 4. At the time of death.
1. At the time of application
An individual planning for retirement wishes to purchase a life insurance policy with living benefits. He does not wish to pay premiums beyond his income earning years. Which of the following life insurance products will best meet those requirements? 1. Limited pay whole life 2. Modified whole life 3. Universal life 4. Term life
1. Limited pay whole life
If an annuitant selects the straight life annuity settlement option, in order to receive all of the money out of the contract, the annuitant would need to 1. Live at least to the age of life expectancy. 2. Die before his life expectancy. 3. Name a beneficiary. 4. Name another annuitant.
1. Live at least to the age of life expectancy
Which type of life insurance policy generates immediate cash value? 1. Single Premium Whole Life 2. Variable Life 3. Limited-pay Whole Life 4. Level Term
1. Single Premium Whole Life
To comply with the timely payment of claims provision, insurers must pay a claim within how many days of receiving proof of loss? 1. 15 days 2. 30 days 3. 45 days 4. 90 days
2. 30 days
An applicant for insurance needed more insurance than the insurer was willing to issue. The insurance producer told him that he could maximize the death benefit without increasing the face amount by adding which of the following riders? 1. Automatic premium loan 2. Return of premium 3. Payor benefit 4. Waiver of premium
2. Return of premium
In insurance, the uncertainty of an individual sustaining a loss in the future is classified as a/an 1. Unknown event. 2. Risk. 3. Hazard. 4. Peril.
2. Risk
Which of the following acts protects consumers against the distribution of incorrect and obsolete personal or financial information? 1. The Consumer Protection Credit Act 2. The Fair Credit Reporting Act 3. PPACA 4. HIPAA
2. The Fair Credit Reporting Act
To secure a lower premium, an applicant for insurance may choose to backdate the application up to 1. 1 month. 2. 3 months. 3. 6 months. 4. 12 months.
3. 6 months
An agent accepts the premium payment 35 days after it is due, telling the insured that the policy will continue to remain in force. This is an example of what type of agent authority? 1. Fiduciary 2. Implied 3. Apparent 4. Express
3. Apparent
The owner of a life insurance policy has all of the following rights EXCEPT 1. Receive cash value. 2. Choose a settlement option. 3. Change the interest rate. 4. Name the beneficiary.
3. Change the interest rate.
A warranty under which certain things will be done or not be done after the policy takes effect is a(n) 1. Promissory warranty. 2. Absolute warranty. 3. Conditional warranty. 4. Affirmative warranty.
3. Conditional warranty
Under which of the following riders will the insurer both waive policy premiums and pay monthly income to the insured if the insured is disabled? 1. Accelerated Benefits Rider 2. Waiver of Premium Rider 3. Disability Income Benefit Rider 4. Waiver of Cost of Insurance
3. Disability Income Benefit Rider
Which of the following losses would likely be covered under the Accidental Death rider? 1. Heart attack 2. Mountain-climbing accident 3. Death resulting from a long-term disability 4. Death caused by a head-on collision
4. Death caused by a head-on collision
Which of the following would be considered a peril? (Choose from the following options) 1. Smoking 2. Driving too fast 3. Gambling 4. Fire
4. Fire
Under which installment option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits? 1. Fixed amount 2. Installment refund 3. Cash refund 4. Fixed period
4. Fixed period
Who is responsible for the content of an insurer's television commercial? 1. Department of Insurance 2. The TV station 3. Advertising agency 4. Insurer
4. Insurer
The Medical Information Bureau (MIB) helps insurers compare medical information they have collected on a potential insured with the information received from 1. Participating doctors. 2. Hospitals. 3. Insureds. 4. Other member insurers.
4. Other member insurers
An adjustable life policy allows the policyowner to do any of the following EXCEPT 1. Skip premium payments. 2. Decrease the premium amount. 3. Shorten the premium paying period. 4. Change the period of protection.
1. Skip premium payments
Which of the following is known as a business continuation agreement? 1. Key person policy 2. Corporate insurance 3. Split dollar plan 4. Buy-sell agreement
4. Buy-sell agreement
When does the free-look period begin for insurance policies? 1. Two weeks after the insurer issues the policy 2. When the insurer issues the policy 3. As soon as the first premium is paid 4. When the policyowner receives the policy
4. When the policyowner receives the policy
A life insurance policy was classified as a Modified Endowment Contract (MEC) in its third year. When will it lose this classification? 1. Once the insured reaches age 65 2. When cash value is less than the premium paid 3. Never 4. When the beneficiary changes
3. Never
Which of the following terms will be permissible in describing a life insurance policy in company advertisements? 1. Savings plan 2. Variable plan 3. Risk-free plan 4. Investment plan
2. Variable plan
When an annuity is surrendered early, the annuitant will receive 1. The annuity value minus the surrender charge. 2. Only the interest earned. 3. Only the premiums paid into the annuity. 4. The full annuity benefit.
1. The annuity value minus the surrender charge
During which of the following annuity periods does an insured make monthly contributions to the annuity for retirement purposes? 1. Distribution period 2. Pay out period 3. Annuity period 4. Accumulation period
4. Accumulation period
An employer gives an employee a wage increase to finance premiums on a life insurance policy on the employee's life. This is known as 1. A key-person policy. 2. A Keogh Plan. 3. An aleatory contract. 4. An executive bonus.
4. An executive bonus.
An insured has a policy in which the death benefit remains level while the premium increases, and is renewable without proof of insurability. What kind of policy is this? 1. Increasing term insurance 2. Decreasing term insurance 3. Guaranteed death benefit 4. Annually renewable term
4. Annually renewable term
Of $10,000 in premiums a producer wrote over the past year, $3,000 came from sales to a business which employs the producer's spouse. This is considered (Choose from the following options) 1. Rebating. 2. A violation of the controlled business regulations. 3. A legal practice. 4. Coercion.
3. A legal practice
Over several years, a policyowner paid $10,000 in premiums for his insurance policy. When he suffered a loss, the insurance company paid out $50,000 in benefits. What characteristic of an insurance contract does this describe? 1. Conditional 2. Adhesion 3. Aleatory 4. Unilateral
3. Aleatory
Which of the following is NOT considered a rebate? (Choose from the following options) 1. Returning part of the premium to the insured as a thank you for buying insurance 2. Any inducement to buy that is not stated in the policy 3. Giving prospective insureds $100 gift cards in return for buying a policy 4. Offering a prospective insured a multi-policy discount
4. Offering a prospective insured a multi-policy discount
Paul is the policyowner of a life insurance policy which will increase significantly in face amount (death benefit) when the insured reaches an age specified in the policy. This policy is referred to as a 1. Single premium policy. 2. Jumping juvenile policy. 3. Limited pay whole life policy. 4. Modified life insurance policy.
2. Jumping juvenile policy
If a term life policy is convertible, that means that at the end of the policy term, the policyowner may convert coverage to 1. An annuity. 2. A Modified Endowment Contract. 3. Another term life policy. 4. A whole life policy.
4. A whole life policy.
Which of the following is TRUE regarding a level term life policy written with a renewable provision? 1. If the policy is renewed without a lapse in coverage, the premium remains the same. 2. At the end of the term, the policy can be renewed without evidence of insurability. 3. The policy automatically renews with no change in coverage or premium. 4. At the end of the term policy, the insured must submit evidence of insurability.
2. At the end of the term, the policy can be renewed without evidence of insurability
Due to a large inheritance, a policyowner no longer needs a life insurance policy and agrees to sell it to a third party for more than its cash value. This type of transaction is called a 1. Modified endowment contract. 2. Life settlement. 3. Brokered arrangement. 4. Stranger-originated life arrangement.
2. Life settlement
Which of the following is NOT an IRS requirement for a qualified retirement plan? 1. The plan must satisfy vesting requirements. 2. The plan must favor shareholders. 3. The plan must be formally communicated to the employees. 4. The plan must be permanent and approved by the IRS.
2. The plan must favor shareholders.
Which of the following disability riders in life insurance allows the policyowner to keep coverage in force without paying policy premiums after a qualifying event? 1. Waiver of cost of insurance 2. Waiver of premium 3. Disability income benefit 4. Accelerated benefit
2. Waiver of premium
If a life insurance policy is not solicited through an intermediary, and if the policy offers a 30-day free-look period, which of the following is true regarding the buyer's guide delivery to the policyowner? 1. It is not required. 2. It must be mailed within 30 days of the policy issue. 3. It must be provided at the time of application. 4. It may be provided at the same time as the policy.
4. It may be provided at the same time as the policy
All of the following are requirements for an intermediary's place of business EXCEPT 1. It must have the intermediary's licenses prominently displayed. 2. It must contain records of intermediary's transactions. 3. It must be accessible to the public. 4. It may be located in another state.
1. It must have the intermediary's licenses prominently displayed
Life insurance intermediaries must hold a securities license if they want to transact what type of insurance products? 1. Universal life policies 2. Equity-indexed policies 3. Annuities 4. Variable policies
3. Annuities
Which of the following is correct regarding a 401(k) plan? 1. Employer may match the employee's contributions to the plan. 2. Loans are not permitted 3. Employee contributions are mandatory. 4. There is no limit on annual contributions.
1. Employer may match the employee's contributions to the plan.
14.If the insurer failed to pay a claim within the required period of time, all overdue payments will be charged an annual interest of 1. 6% 2. 7.5% 3. 8.5% 4. 10%
2. 7.5%
Which of the following riders usually expires when the covered insured reaches a specific age? (Choose from the following options) 1. Family Term 2. Limited Pay 3. Single Premium 4. Children's Term
4. Children's Term
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 1. Reinstatement clause. 2. Insuring clause. 3. Misstatement of age clause. 4. Incontestability clause.
4. Incontestability clause
According to the general statutes and rules for insurance contracts issued in this state, who should receive notice of right to file a complaint? 1. All policyowners when a policy is issued 2. Only the insureds who have submitted claims 3. Only the policyowners who are not the insureds 4. The applicants whose requests for insurance have been denied
1. All policyowners when a policy is issued
Which of the following is a characteristic of an equity indexed annuity? 1. Interest rates are not guaranteed. 2. Annuitants cannot share in excess interest. 3. Interest rates are often associated with a stock index. 4. It is a variable annuity.
3. Interest rates are often associated with a stock index
A life insurance producer may share commissions with (Choose from the following options) 1. Any licensed producer. 2. Any person who provides a referral. 3. An insurer's officer or director. 4. Another life producer.
4. Another life producer
Where does a domestic insurer have its home office? (Choose from the following options) 1. In more than one state 2. In the U.S. 3. In any town where it transacts its business 4. In this state
4. In this state
If an insurer makes a statement misrepresenting or incompletely comparing the terms of any insurance policy to induce a policyholder to drop an existing policy, what unfair practice has occurred? (Choose from the following options) • 1. Fraud • 2. Embezzlement • 3. Defamation • 4. Twisting
4. Twisting
A whole life policy's cash value will equal the face amount when the insured reaches what age? 1. 65 2. 70½ 3. 72 4. 100
4. 100
if the owner of a traditional IRA decides to withdraw funds prior to age 59½, funds are subject to an additional tax of 1. 5%. 2. 10%. 3. 15%. 4. 20%.
2. 10%.
50. An insured just got married and would like to purchase additional coverage on his existing life insurance policy. Which of the following policy riders will allow the insured to purchase additional coverage without evidence of insurability? 1. Guaranteed renewability 2. Nonforfeiture option 3. Spouse term rider 4. Guaranteed insurability
4. Guaranteed insurability
Which of the following insurance principles states that the larger the number of people with a similar exposure to loss, the more predictable actual losses will be? 1. Adverse selection 2. Exposure units 3. Underwriting 4. The law of large numbers
4. The law of large numbers
A consumer would like to get more information on their Investigative Consumer Report. How many days does the insurer have to comply? 1. 3 days 2. 5 days 3. 7 days 4. 10 days
2. 5 days
Unused premiums are returned to policyowners tax free in the form of 1. Stocks. 2. Premiums. 3. Policy loans. 4. Dividends.
4. Dividends
Avoiding tax consequences when transferring assets from one IRA to another can be accomplished by which of the following? 1. Waiting until after 60 days to deposit funds in a new plan 2. Taking a partial distribution of funds 3. A direct rollover from one plan to the other 4. Withholding of 20% of the funds
1. Waiting until after 60 days to deposit funds in a new plan
A person who knowingly obtains information on a consumer from a consumer reporting agency under false pretenses may be imprisoned for up to how many years? End 1. 1 year 2. 2 years 3. 3 years 4. 5 years
2. 2 years
How often must individual agents pay their licensing fees? (Choose from the following options) 1. Every 6 months 2. Annually 3. Every 2 years 4. Every 5 years
3. Every 2 years
Under a universal life insurance policy, policyowners have a choice between what two types of premiums? 1. Adjustable premium and target premium 2. Current interest premium and recommended premium 3. Minimum premium and target premium 4. Flexible premium and level premium
3. Minimum premium and target premium
For the purposes of life insurance underwriting, a 35-year-old male who is in excellent physical condition with no known medical problems or hazardous hobbies would most likely be classified as a 1. Substandard risk. 2. Rated risk. 3. Preferred risk. 4. Standard risk.
3. Preferred risk
According to the Fair Credit Reporting Act, consumer reports are prohibited from reporting negative information about a customer after how many years? 1. 3 years 2. 5 years 3. 6 years 4. 7 years
4. 7 years
If an insurer requires that an applicant or insured undergo a physical examination in order to obtain or continue coverage, who must pay the cost of such examination? (Choose from the following options) 1. Insured 2. Applicant 3. Insurance producer 4. Insurer
4. Insurer
Which of the following is TRUE regarding the annuity period? (Choose from the following options) 1. During this period of time the annuity payments grow interest tax deferred. 2. It is also referred to as the accumulation period. 3. It is the period of time during which the annuitant makes premium payments into the annuity. 4. It may last for the lifetime of the annuitant.
4. It may last for the lifetime of the annuitant.
When replacing a life insurance policy, a producer has all of the following duties EXCEPT 1. Give the applicant copies of all replacement related communication. 2. Obtain a list of existing life insurance policies. 3. Send a written communication to existing insurers advising them of the proposed replacement. 4. Provide a signed Notice Regarding Replacement to the applicant.
2. Obtain a list of existing life insurance policies
The assignment provision in a life insurance policy allows the policyowner to change 1. The premiums. 2. The ownership of the policy. 3. The insured. 4. The amount of coverage.
2. The ownership of the policy
Which of the following is an intermediary who acts on behalf of the insured in insurance transactions? (Choose from the following options) 1. Insurance broker 2. Reinsurance agent 3. Insurance agent 4. Managing general agent
1. Insurance broker
For federal tax purposes, which of the following is true regarding lump-sum life insurance benefits? 1. It is received tax free. 2. It is subject to capital gains tax. 3. It is taxed as a percentage of income. 4. It is taxed as ordinary income.
1. It is received tax free
Which of the following nonforfeiture options would be automatically implemented by the insurer if none of the other options has been selected by the policyowner? 1. Reduced paid-up insurance 2. Cash surrender value 3. Interest only 4. Extended term
2. Cash surrender value
Under a key person policy, the key employee is the 1. Premium payer. 2. Beneficiary. 3. Policyowner. 4. Insured.
3. Policyowner
An agent who offers a cash reward to a prospect for buying a policy is guilty of 1. Rebating. 2. Coercion. 3. Twisting 4. Controlled business.
1. Rebating
Who maintains the rights in an annuity? (Choose from the following options) 1. The beneficiary 2. The insurance agent 3. The insurer 4. The owner
4. The owner
To qualify for waiver of premium benefit, an insured must meet the policy's definition of 1. Fully insured. 2. Currently insured. 3. Total disability. 4. Partial disability.
3. Total disability
Which of the following describes twisting? (Choose from the following options) 1. Policy replacement that is to the detriment of the policyowner 2. Policy replacement that is in the insured's best interest 3. Policy replacement when an insured has had a policy for less than one year 4. Policy replacement in which the agent's commission is greater
4. Policy replacement in which the agent's commission is greater