Life Insurance Illinois ExamFX

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 Interest-sensitive whole life, also referred to as current assumption life, is a whole life policy that provides a guaranteed death benefit to age 100.

If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a A. Guaranteed insurability rider B. Paid-up additions option C. Cost of living provision D. Nonforfeiture option

A. Guaranteed insurability rider The Guaranteed Insurability rider allows the policyowner to purchase specific amounts of additional insurance at specific dates or events, without proving continued insurability. Rates for the additions are based upon attained age.

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 Annually renewable term in a form of level term insurance that offers the most insurance at the lowest cost

The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose? A. Fixed amount option B. Interest only option C. Life income with period certain D. Joint and survivor

B. Interest only option With the interest-only option, the insurance company retains the policy proceeds and pays interest on the proceeds to the recipient (beneficiary) at regular intervals

Which of the following statements is TRUE concerning the Accidental Death Rider? A. It is only available in group insurance B. It will pay double or triple the face amount C. It is also known as a triple indemnity rider D. This rider is only available to insureds over the age of 65

B. It will pay double or triple the face amount The Accidental Death Rider pays 2 or 3 times the face amount of death is the result of an accident as defined in the policy and occurs within 90 days of such an accident.

A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will A. Automatically pay the policy proceeds B. Pay the policy proceeds only if it would have issued the policy C. Pay the policy proceeds up to an establish limit D. Not pay the policy proceeds under any circumstances

B. Pay the policy proceeds only if it would have issued the policy The conditional receipt says that coverage will be effective either on the date of the application or the date of the medical exam, whichever occurs last, as long as the applicant is found to be insurable as a standard risk, and policy is issued exactly as applied for

Which type of retirement account does not require the owner to start taking distributions at age 72? A. Traditional IRA B. Roth IRA C. Nonqualified IRA D. Standard IRA

B. Roth IRA Roth contributions can continue regardless of the account owner's age, and in contrast with a traditional IRA, distributions do not have to begin at age 72.

In order to qualify for conversion from a group life policy that has been terminated to an individual policy of the same coverage, a person must have been insured under the group plan for how many years? A. 1 B. 3 C. 5 D. 10

C. 5 If the master contract is terminated, every individual who has been on the plan for at least 5 years will be allowed to convert to individual insurance of the same coverage

All of the following are business uses of life insurance EXCEPT A. Funding against financial loss caused by the death of a key employee B. Funding business continuation agreements C. Funding against company's general financial loss D. Compensating executives

C. Funding against company's general financial loss

If a licensee charges any fee separate from a commission off of the insured's premium, and if the fee exceeds 10% of the the premium's value, what must the licensee obtain? A. Special tax form B. Premium Fund Trust form C. Insured's signature D. Director's permission

C. Insured's signature If the combined compensation or free exceeds 10% of the premium amount, the disclosure must also include the signature of the consumer.

What is another name for interest-sensitive whole life insurance? A. Variable life B. Term life C. Adjustable life D. Current assumption life

D. Current assumption life Interest-sensitive whole life, also referred to as current assumption life, is a whole life policy that provides a guaranteed death benefit to age 100.

Which of the following statements about the reinstatement provision is true? A. It permits reinstatement within 10 years after a policy has lapsed B. It provides for reinstatement of a policy regardless of the insured's health C. It guarantees the reinstatement of a policy that has been surrendered for cash D. It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated

D. It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated Upon policy reinstatement, the policyowner will be required to pay all back premiums plus interest, and may be required to repay any outstanding loans and interest

All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT A. Any type of insurance policy may be used B. The employer pays a bonus to a selected employee to fund the policy C. It is considered a nonqualified employee benefit D. The policy is owned by the company

D. The policy is owned by the company The policy is owned by the employee

Which of the following is NOT true of life settlements? A. They could be used for a key person coverage B. They could be sold for an amount greater than the current cash value C. They involve insurance policies with large face amounts D. The seller must be terminally ill

D. The seller must be terminally ill With Life Settlements, unlike with viatical settlements, the seller does not need to be terminally ill.

The interest earned on policy dividends is A. Tax deductible B. 40% taxable, similar to a capital gain C. Taxable D. Nontaxable

C. Taxable Dividends are a return of unused premiums on which the insured has already paid taxes. Any interest earned is taxable as ordinary income.

Children's riders attached to whole life policies are usually issued as what type of insurance? A. Variable life B. Adjustable life C. Whole life D. Term

D. Term Children's term riders provide term insurance with coverage expiring when the minor reaches a certain age

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

The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the A. One-year term option B. Paid-up option C. Accelerated endownment D. Paid-up additions

A. One-year term option The dividend is utilized to purchase one-year term insurance

A proposed policy form includes accelerated benefits. Before the policy can be legally used, it must be approved by which of the following? A. Policy Review Board B. Department of Insurance C. Guaranty Association D. Medical Information Bureau

B. Department of Insurance All policy and certificate forms must be filed with and approved by the Department of Insurance prior to use.

Who must inform the Director of a producer's felony conviction? A. FBI B. The producer C. MID D. State police

B. The producer A producer who is convicted of a felony must report the conviction to the Director within 30 days

What is the resident producer license fee payable once every two years? A. $250 B. $100 C. $180 D. $50

C. $180

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

C. Universal life Universal life products allow the partial withdrawal, or surrender, of the policy cash value

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

D. When the application is signed and a check is given to the agent The policy can be effective as early as the date of the application, if the premium is submitted with the application and the policy is issued as applied for

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 limited-pay whole life policy, just like straight life, endows for the face amount if the insured lives to age 100. The premium is, however, completely paid off in 20 years

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

A. Annually Renewable Term Annually renewable term is the purest form of term insurance. The death benefit remains level, but the premium increases each year with insured's attained age.

Whic of the following outlines the features of various policies and outlines the advantages and disadvantages to both? A. Buyer's Guide B. Policy Index C. Comparative Policy Analysis D. Applicant's Guide

A. Buyer's Guide The Buyer's Guide is a document that contains and is limited to the language contained in the appendix of the Illinois regulation or language approved by the Director. It describes the differences among different types of policies and outlines the features and the advantages and disadvantages of each type.

An insured under a life insurance policy has been idagnosed with a terminal illness and has 6 months to live. The insured knows that his financial state will worsen even more with the upcoming medical expenses. What option could the insured utilize? A. Viatical settlement B. Estate liquidation C. Nonpayment of premium D. Change of beneficiary

A. Viatical settlement A viatical settlement allows an insured with a life-threatening condition to sell the existing policy in order to receive benefits when they are most needed. Viators typically received a percentage of the policy's face value from the person who purchases the policy.

What is the maximum fine for a violation of a cease and desist order? A. $100 B. $500 C. $1,000 D. $5,000

C. $1,000 Any person who violates a cease and desist order is subject to a fine of up to $1,000, which may be recovered in a civil action, for each violation. The Director also has the power to revoke or suspend any license or certificate of authority for such violation

How long must an insurer keep books and records of insurance transactions in the Premium Fund Trust Account? A. 3 years B. 5 years C. 7 years D. Indefinitely

C. 7 years Books and records for each fiscal or calendar year must be maintained for at least 7 years.

Insurance polices 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 A contract of adhesion is prepared only by the insurer; the insured's only option is to accept or reject the policy as it is written.

All of the following are duties and responsibilities of producers at the time of application EXCEPT A. Explain the nature and type of any receipt the producers is giving to the applicant B. Probe beyond the stated questions if the producer feels the applicant is misrepresenting or concealing information C. Check to make sure that there are no unanswered questions on the application D. Change any incorrect statement on the application by personally initialing next to the corrected statement

D. Change any incorrect statement on the application by personally initialing next to the corrected statement

What is the name of the insured who enters into a viatical settlement? A. Third party B. Contingent C. Viatical broker D. Viator

D. Viator Viator means the owner of a life insurance policy who enters into or seeks to enter into a viatical settlement contract

A participating insurance policy may do which of the following? A. Provide group coverage B. Pay dividends to the stockholder C. Require 80% participation D. Pay dividends to the policyowner

D. Pay dividends to the policyowner A participating insurance policy will pay dividends to the owner based upon actual mortality cost, interest earned and costs.

A person is in the process of becoming permanently licensed as a producer. A temporary producer's license may be issued for a maximum period of A. 90 days B. 100 days C. 120 days D. 180 days

A. 90 days The Director may grant a temporary insurance producer licensee to an applicant, without requiring an examination, for a period of 90 days, when the applicant otherwise meets the requirements for a license.

According to the entire contract provision, what document must be made part of the insurance policy? A. Agent's report B. Outline of coverage C. Copy of the original application D. Buyer's Guide

C. Copy of the original application An insurance contract must contain a copy of the original application

If an insured worker has earned 40 quarters of coverage, the worker's status under Social Security disability is A. Correctly insured. B. Permanently insured. C. Fully insured. D. Partially insured.

C. Fully insured. A worker is fully insured under Social Security if the worker has accumulated the required number of credits based on his/her age.

Which of the following defines the term controlled business? A. Insurance written on the interests of the producers who solicits a policy B. Insurance policies regulated by the State Department of Insurance C. Lines of authority for which a producer is licensed D. Transactions that are subject tot he examination by the Director

A. Insurance written on the interests of the producers who solicits a policy In this state, controlled business is defined as the insurance written on the interests of the licensee him/herself and his/her property or risks; the licensee's spouse and his/her property or risks; or the licensee's employer's or own business' life property or risks.

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 Insurers writing variable life insurance policies may defer loan requests for up to 6 months. This excludes loan requests used to pay policy premiums.

When a producer was reviewing a potential customer's coverage written by another company, the producer made several remarks that were maliciously critical of that other insurer. The producer could be found guilty of A. Discrimination B. Nothing, unless the remarks were in writing C. Defamation D. Misrepresentation

C. Defamation A producer or broker who makes oral or written statements intended to injure another producer or insurer is guilty of the unfair trade practice and defamation

Which of the following applies to the 10-day free-look privilege? A. It can be waived only by the insurance company B. It is granted only at the option of the agent C. It permits the insured to return the policy for a full refund of premiums paid D. It allows the insured 10 days to pay the initial premium

C. It permits the insured to return the policy for a full refund of premiums paid A policyowner may return a policy for any reason during the free-look period and receive a full refund

Which of the following would be required to be licensed as an insurance producer? A. A person whose activities are limited to producing insurance advertisements B. A salaried full-time employee who furnishes information for group insurance C. An insurance company director who performs executive, administrative and managerial duties D. A salaried employee who advertises and solicits insurance

D. A salaried employee who advertises and solicits insurance Once there is solicitation involved, a license is required.

What are the general duties of the Director of Insurance? A. Make rules to implement the insurance code B. Conduct investigations C. Enforce Illinois insurance laws D. All of the above.

D. All of the above.

A group insurance policy was solicited by a limited insurance representative. Which of the following is true according to the disclosure regulation? A. Disclosure regulation does not apply to limited insurance representatives. B. Discloser regulation does not apply to group insurance C. The name of the representative must be displayed on each certificate of insurance D. The representative's name and signature must appear on the master policy.

D. The representative's name and signature must appear on the master policy. Any policy solicitation which involves an insurance producer, limited insurance representative, or temporary insurance producer must identify the name of the producers, representative, or firm on the policy.

Which provision of a life insurance policy states the insurer's duty to pay benefits upon the death of the insured, and to whom the benefits will be paid? A. Insuring clause B. Entire contract clause C. Beneficiary clause D. Consideration clause

A. Insuring clause The insuring clause states that the insurer agrees to provide life insurance for the named insured which will be paid to a designated beneficiary when proof of loss is received by the insurer.

Which of the following is NOT a duty of the Director of Insurance? A. Issuing Certificates of Authority B. Setting premium rates C. Examining authorized insurers D. Enforcing the Insurance Code

B. Setting premium rates The Director reviews rates to make sure they are fair, adequate, and not unfairly discriminating, but does not develop the rates.

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 Acceptance takes place when an insurer's underwriter approves the application and issues a policy

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. Conditional B. Contingent C. Aleatory D. Unilateral

A. Conditional A conditional contract requires both the insurer and policyowner to meet certain conditions before the contract can be executed, unlike other types of policies which put the burden of condition on either the insurer or the policyowner

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 premiuum 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 Annually renewable term is a form of level term insurance that offers the most insurance at the lowest cost

Which of the following policies would be classified as a traditional level premium contract? A. Variable Universal Life B. Straight Life C. Adjustable Life D. Universal Life

B. Straight Life Straight whole life policies have a level guaranteed face amount and a level premium for the life of the insured.

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 An individual policy must be issued based on the individual's attained age

When the insured sleects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount? A. In lesser amounts for the remaining policy term of age 100 B. Equal to the cash value surrendered from the policy C. The same as the original policy minus the cash value D. Equal to the original policy for as long as the cash values will purchase

D. Equal to the original policy for as long as the cash values will purchase The cash value is used as a single premium to purchase the same face amount as the original policy for as long a period of time as the cash will buy at the insured's current age

The Ownership provision entitles the policyowner to do all of the following EXCEPT A. Set premium rates B. Receive a policy loan C. Assign the policy D. Designate a beneficiary

A. Set premium rates The insurer sets premium rates based upon underwriting considerations

What is the official name for the Social Security program? A. Defined Benefit Retirement Insurance B. Qualified Pension Plan C. Old Age Survivors Disability Insurance D. Social Insurance Program

C. Old Age Survivors Disability Insurance Social Security is formally called Old Age Survivors Disability Insurance or OASDI

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 The other-insureds rider is useful in providing insurance for more than one family member. The type of insurance offered by this rider is usually term insurance, with the right to convert to permanent insurance

The minimium number of credits required for partially insured status for Social Security disability benefits is A. 4 credits B. 6 credits C. 10 credits D. 40 credits

B. 6 credits To be considered partially insured, an individual must have earned 6 credits during the last 13 quarter period.

All of the following are examples of third-party ownership of a life insurance policy EXCEPT A. An insured couple purchases a life insurance policy insuring the life of their grandson B. A company purchases a life insurance policy on their manager, who is an important part of the operation C. When an insured purchased a new home, the insured made an absolute assignment of a life insurance policy to the mortgage company D. An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan

D. An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan A collateral assignment is the transfer of some or all of the death benefits of the policy to a creditor as security for a loan, but does not give the creditor the rights of ownership. In the event of the insured's death, the creditor would only be able to recover that portion of the policy's proceeds equal to the creditor's remaining interest in the loan

j applied for a life insurance policy one January. the policy was issued January 31. j's agent was vacationing at the time the policy was issued, so j did not receive the policy until February 18. j decides that he does not want the policy. when would j need to return to the insurer in order to receive a full refund of premium paid? A. February 28th, or 10 days after the time the policy is delivered B. The time varies from one policy to another C. It was already to late when j received the policy because the 10-day free-look period has expired D. Anytime, because the agent did not deliver the policy promptly

A. February 28th, or 10 days after the time the policy is delivered The 10-day free-look period begins when the policy is delivered

Which of the following is NOT true regarding a Premium Fund Trust Account? A. It could be used as a claim payment account B. It is a fiduciary account C. It may be a depository for service fees and late charges D. It is established to maintain all the premiums

A. It could be used as a claim payment account PFTA cannot be used as a general operation or a claim payment account. it is a fiduciary account into which all collected premiums or other monies, such as service fees, later charges and inspection fees must be deposited

Stranger-originated life insurance policies are in direct opposition to the principle of A. Indemnity B. Insurable interest C. Law of large numbers D. Good faith

B. Insurable interest Because the purchaser of a stranger-originated life insurance policy doesn't know the insured, or have any interest in the insured's longevity, STOLI policies violate the principle of insurable interest

All policy applications must identify which of the following? A. Director B. Producer who solicited the applicant's business C. Conditions of acceptance D. MIB

B. Producer who solicited the applicant's business All policies must identify the producer or insurer that solicited the business. Applications for individual life, accident and health or group coverages must bear the name and signature of the producer who solicited and wrote the application

An applicant for a fire insurance producer's license must successfully complete an approved prelicensing education course of at least A. 10 hours B. 12.5 hours C. 20 hours D. 40 hours

C. 20 hours Unless exempt, those applying for a fire insurance producer's license must first complete an approved course of study of at least 20 hours before they can submit their application to the Director to take the licensing examination

Which of the following persons is required to hold a producer license? A. A person who takes messages related to claims B. A person who administers employee benefits C. A person who negotiates insurance contracts D. A person who creates insurance advertisements

C. A person who negotiates insurance contracts Persons who perform clerical tasks that are not related to soliciting or negotiating insurance contracts are not required to be be licensed (like the rest of the options)

All of the following are regulated areas of the insurance industry EXCEPT A. Trade practices B. Investments C. Commissions D. Producers

C. Commissions The Director of insurance is charged by the Insurance Code to regulate the business of insurance in the state. Commissions, however, are negotiated between the insurer and producer

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

D. A level annual premium for the life of the insured. Straight Life policies charge a level annual premium for the lifetime of the insured and provide a level, guaranteed death benefit.

Which of the following is called a "second-to-die" policy? A. Family income B. Juvenile life C. Joint life D. Survivorship life

D. Survivorship life Survivorship life is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age.

Which of the following best defines the "owner" as it pertains to life settlement contracts? A. The insurance provider B. The policyowner of the life insurance policy C. A financial entity that sponsors the transaction D. A fiduciary for the contract

B. The policyowner of the life insurance policy The term owner refers to the owner of a policy who may seek to enter into a life settlement contract.

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. Whole life B. Ordinary Life C. Joint Life D. Decreasing Term

C. Joint Life A Joint Life policy covering two lives would be the least expensive because the premiums are based on an average age and it would pay a death benefit only at the first death.

Which of the following is NOT true regarding a Premium Fund Trust Account? A. It could be used as a claim payment account B. It is a fiduciary account C. It may be a depository for service fees and late charges D. It is established to maintain all the premiums

A. It could be used as a claim payment account PFTA cannot be used as a general operation or a claim payment account.

How often does a viatical settlement provider's license expire? A. Every 3 years B. Every 5 years C. Every year D. Every 2 years

C. Every year The viatical settlement provider's license expires every year on the anniversary date.

If an insurer requires a medical examination of an applicant in connection with the application for life insurance, who is responsible for paying the cost of the examination? A. The examiner B. The applicant C. The insurer D. The cost of the examination will be waived

C. The insurer During the underwriting process, an insurer may require than an applicant receive a medical examination. The insurer is responsible for the associated costs of the the examination

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy? A. Mutual B. Reciprocal C. Nonprofit service organization D. Stock

A. Mutual Funds paid out after paying claims and other operating costs are returned to the policyowners in the form of a dividend for a Mutual insurer.

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. Answer the missed questions for the applicant B. Acknowledge the missed questions with a signature and continue the policy issue process C. Proceed with issuing a policy D. Return to the applicant for completion

D. Return to the applicant for completion Any unanswered questions need to be answered before the policy is issued. If the insurer received incomplete applications, they need to be returned to the applicants for completion.

Which of the following would qualify as a competent party in an insurance contract? A. The applicant is intoxicated at the time of the application B. The applicant is a 12-year-old student C. The applicant is under the influence of a mind-impairing medication at the time of application D. The applicant has a prior felony conviction

D. The applicant has a prior felony conviction When an insurer and insured enter into a contract, both parties must be of legal age and mentally competent. It is legal for a person convicted of a felony to buy an insurance contract. An intoxicated person, however, may not be mentally competent, a 12-year-old student is considered to be underage in most states and a person under mind impairing medication most likely would not be mentally competent.

Which of the following is TRUE about the 10-day free-look period in a Life Insurance policy? A. It applies only to term life insurance policies B. It is optional on all life insurance policies C. It begins when the policy is delivered D. It begins when the application is signed

C. It begins when the policy is delivered The 10-day free-look provision is a mandatory provision that allows the insured to examine a policy, and if dissatisfied for any reason, return the policy for a full refund of any premiums paid.

Which of the following will be included in a policy summary? A. Comparisons with similar policies B. Primary and secondary beneficiary designations C. Premium amounts and surrender values D. Copies of illustrations and application

C. Premium amounts and surrender values A policy summary must be delivered along with the policy and will provide the producer's name and address, the insurance company's home office address, the generic name of the policy issued, and premium, cash value, surrender value and death benefit figures for specific policy years

An insured committed suicide one year after his life insurance policy was issued. The insurer will A. Pay nothing B. Refund the premiums paid C. Pay the policy's cash value D. Pay the full death benefit to the beneficiary

B. Refund the premiums paid If the insured commits suicide within 2 years following the policy effective date, the insurer's liability is limited to a refund of premium.

An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin? A. When the agent submits the application to the company and the company issues a conditional receipt B. When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health C. On the designated effective date D. On the application date

B. When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health If the initial premium is not paid with the application, the agent will be required to collect the premium at the time of policy delivery. In this case, the applicant will most likely need to fill out a Statement of Good Health

Which of the following is NOT an example of a valid insurable interest? A. Employer in key employee's life B. Child in parent's lives C. Debtor in the life of the creditor D. Business partners in each other's lives

C. Debtor in the life of the creditor The three recognized areas in which insurable interest exists are as follows: a policyowner insuring their own life, the life of a family member, or the life of a business partner, key employee, or someone who has a financial obligation to the policyowner. A debtor does not have an insurable interest in the creditor

The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called A. Guaranteed insurability B. Waiver of cost of insurance C. Payor benefit D. Waiver of premium

D. Waiver of premium Waiver of premium rider waives the premium if the insured owner has been totally disabled for an predetermined period. The payor benefit provides for an owner other than the insured and the waiver of cost of insurance is found in Universal Life.

A Universal Life Insurance policy is best described as a/an A. Annually Renewable Term policy with a cash value amount 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. A universal policy has two components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.

In classifying a risk, the Home Office underwriting department will look at all of the following EXCEPT A. Applicant's past income B. Applicant's past medical history C. Applicant's present physical condition D. Applicant's present occupation

A. Applicant's past income In classifying a risk, the Home Office underwriting department will look at the applicant's past medical history, present physical condition, occupation, habits and morals.

Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner? A. Cash surrender B. Reduced paid-up C. Paid-up options D. Extended term

A. Cash surrender Once the cash surrender value is paid, the contract is over

A producer conducts business ethically and receives high praise from most customers. The producers pays all of the required license renewal fees, but receives a notice that its license has been terminated. What is the most likely reason for this? A. Lack of continuing education B. Lack of customer volume C. The company did not pass its semi-annual exam D. The license expires

A. Lack of continuing education An insurance producer license will remain in effect unless revoked or suspended as long as the renewal fees are paid and the continuing education requirements are satisfied.

An insured has had a life insurance policy he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident, and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do? A. Pay a reduced death benefit B. Pay the full death benefit C. Pay nothing; there was a misrepresentation on the application' D. Pay the full death benefit and refund excess premium

A. Pay a reduced death benefit The incontestability clause prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years. However, it does not apply to statements relating to age, sex, and identity.

Which of the following is correct regarding the Director's ability to revoke or suspend a producer's license? A. The producer must be given the reason, in writing for the nonrenewal, suspension, or denial of a license, and has the right to request a hearing within 30 days. B. The producer will not lose a license for failure to replay student loans owed to the Illinois Student Assistance Commission C. The producer may lose their license without a hearing. D. The producer may not lose their license for conviction of any felony

A. The producer must be given the reason, in writing for the nonrenewal, suspension, or denial of a license, and has the right to request a hearing within 30 days. Producers must be given a reason, in writing, for a nonrenewal, suspension, or denial of a license, and have the right to request a hearing within 30 days. The Director may not revoke or suspend a producer's license without a hearing. Producers convicted of a felony and those who fail to repay student loands owed to the Illinois Student Assistance Commission are subject to nonrenewal, suspension, or denial of a license.

The Director informs a producer that its license has been terminated and immediately receives a request for the charges to be reviewed in court. Within what maximum number of days must the hearing be held? A. 14 B. 30 C. 60 D. 90

B. 30 If a producer wants to contest or review the charges in court, the request must be made within 30 days of the order. After the Director receives the request, a hearing must occur within 20-30 days.

Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member? A. Additional insured rider B. Family term rider C. Spouse rider D. Children's rider

B. Family term rider A single rider that provides coverage on every family member is called a "family rider"

An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy? A. Nonforfeiture options B. Guaranteed insurability option C. Dividend options D. Guaranteed renewable option

B. Guaranteed insurability option The guaranteed insurability option allows the insured to purchase specific amounts of additional insurance at specific times without proving insurability

All of the following are characteristics of group life insurance EXCEPT A. Certificate holders may convert coverage to an individual policy without evidence of insurability B. Premiums are determined by the age, sex, and occupation of each individual certificate holder C. Amount of coverage is determined according to nondiscriminatory rules D. Individuals covered under the policy receive a certificate of insurance

B. Premiums are determined by the age, sex, and occupation of each individual certificate holder Premiums are determined by the age, sex and occupation of the entire group

If an actuary would like to sell life insurance polices, what licensure is needed? A. Broker's license B. Insurer's license C. Producer's license for life insurance D. General producer's license

C. Producer's license for life insurance Anyone who sells, solicits, negotiates, procures, renews, or binds insurance policies must hold a valid producer license for the class of insurance being transacted.

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

C. The interest is not taxable since it remains inside the insurance policy The interest credited under this option is TAXABLE, whether or not the policyowner receives it.

An insured purchased a life insurance policy on his life naming his wife as primary beneficiary, and his daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit? A. If the insured died from accidental means B. If the primary beneficiary predeceased the insured C. When the insured dies, the primary and contingent beneficiaries share death benefits equally. D. With the primary beneficiary's written consent

B. If the primary beneficiary predeceased the insured The daughter would become the primary beneficiary here and then receive the insured's death benefit

A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy A. Decreased death benefit at each renewal B. Required a premium increase each renewal C. Built cash values D. Required proof of insurability every year

B. Required a premium increase each renewal Premiums are adjusted each year for Annually Renewable Term Life policies to the insured's attained age.

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

B. Return the application to the applicant for completion Any unanswered questions need to be answered before the policy is issued. If the insurer receives incomplete applications, they need to be returned to the applicants for completion.

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 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 B. The insured's premiums will be waived until she is 21 C. The premiums will become tax deductible until the insured's 18th birthday D. Since it is the policyowner, and not the insured, who has become disabled, the life insurance policy will not be affected

B. The insured's premiums will be waived until she is 21 If the payor becomes disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches a certain age, such as 21.

An applicant receives a temporary insurance producer license. After 80 days, the owner of the insurance company decides to sell the business. Which of the following is TRUE? A. The Director will assess the case and make the ultimate decision B. The license will automatically terminate C. The license can be applied elsewhere D. The license may be converted to a permanent producer license

B. The license will automatically terminate A temporary license may not continue after the owner or the personal representative disposes of the business

If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it? A. A legal (but unetheical) contract B. Unilateral C. Adhesion D. Conditional

B. Unilateral

All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT A. Upon conversion, the premium for the permanent policy will be based upon attained age B. Upon conversion, the death benefit of the permanent policy will be reduced by 50% C. Evidence of insurability is not required D. Most term policies contain a convertibility option

B. Upon conversion, the death benefit of the permanent policy will be reduced by 50% Convertible term insurance is convertible without proof of insurability up to the full term death benefit. However, upon conversion, the premium for the permanent policy will be based on the insured's attained age.

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

B. When the income payments begin The main difference between immediate an deferred annuities is when the income payments begin. Immediate annuities will begin payments within the first year, while deferred annuities will not begin payments until sometime after the first year.

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 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 amount. In this case, what will the policy beneficiary receive? A. $0 B. $50,000 (50% of the policy value) C. $100,000 D. $300,000 (Triple the amount of policy value)

C. $100,000 Since the insured contributed to his own death, the triple indemnity rider is void, but the beneficiary will still receive the policy's death benefit.

An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto addicent, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement? A. $0 B. $100,000 C. $200,000 D. $100,000 plus the total of paid premiums

C. $200,000 The beneficiary would most likely receive twice the face value of the policy, since his fatal injuries were caused by an accident and he died within the 90-day benefit limit stipulated in most policies.

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 policy? A. $20,000 B. $25,000 C. $50,000 D. The face amount will be determined by the insurer.

C. $50,000 The face of the term policy would be the same as the face amount provided under the whole life policy

What is the maximum percentage of the face amount of a life insurance policy that can be paid in an acceleration of benefits? A. 25% B. 50% C. 75% D. 100%

C. 75% The occurrence of any one of the covered conditions set forth in Illinois law may result in the payment of an accelerated benefit of up to 75% of the face amount of the policy.

Which of the following statements concerning buy-sell agreements is true? A. Benefits received are considered income taxable. B. Buy-sell agreements pay in the event of a medical emergency C. Buy-sell agreements are normally funded with a life insurance policy D. Premiums paid are deductible as a business expense

C. Buy-sell agreements are normally funded with a life insurance policy A buy-sell agreement is simply a contract that establishes what will be done with a business in the event that an owner dies. Buy-sell agreements are normally funded with a life insurance policy.

A legally acceptable attempt by an existing insurer to dissuade a current policyowner from the replacement of existing life insurance is called A. Rebating B. Retention C. Conservation D. Solicitation

C. Conservation Conservation means any attempt by the existing insurer or its producers, or by a broker to dissuade a current policyowner from the replacement of existing life insurance or annuity

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 A convertible term policy has a provision that allows the policyowner to convert to permanent insurance

Fixed annuities provide all of the following EXCEPT A. Minimum guarenteed rate of interest B. Future income payments C. Hedge against inflation D. Equal monthly payments for life

C. Hedge against inflation Fixed annuities invest premium payments into a general account - a safe and conservative investment portfolio. They also provide a specified dollar amount for each annuity payment regardless of the purchasing power of the money. Variable annuities premiums are invested in securities, hopefully maintaining a constant purchasing power, and therefore providing protection against inflation.

A father purchases a life insurance policy on his teenage daughter and adds the Payor Benefit rider. In which of the following scenarios will the rider waive the payment of premium? A. If the daughter is disabled for more than 3 months. B. If the daughter is disabled for any length of time C. If the father is disabled for more than 6 months D. If the father is disabled for at least a year

C. If the father is disabled for more than 6 months Payor benefit only pays if the owner of the policy (the father in this example) is disabled for at least 6 months.

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 the use to provide these benefits? A. Flexible payment annuity B. Deferred interest annuity C. Immediate annuity D. Variable annuity

C. Immediate annuity An annuity purchased with a single lump-sum payment, with a 25-year fixed-period distribution will be most suitable for this arrangement

Which of the following is true of a children's rider added to an insured's permanent life insurance policy? A. The policy covers only the natural children of the insured. B. Each child covered must show evidence of insurability C. It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age. D. It is permanent insurance.

C. It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age.

What is the main purpose of the Seven-pay Test? A. It guarantees the minimum interest B. It determines if the insurance policy is a MEC C. It requires level premium payments for 7 years. D. It ensures that the policy benefits are paid out in 7 years

C. It requires level premium payments for 7 years.

Which of the following is the best reason to purchase life insurance rather than annuities? A. To create regular income payments B. To liquidate a sum of money over a lifetime C. To create an estate D. To liquidate a sum of money over a period of years

C. To create an estate With insurance, the death benefit creates an immediate estate should the insured die.

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. Unilateral B. Conditional C. Personal D. Adhesion

D. Adhesion A contract of adhesion is prepared by only the insurer; the insured's only option is to accept or reject the policy as it is written.

All of the following would be considered rebating EXCEPT A. An agent offers the use of his lake house to a client as an inducement to buy an insurance policy from him B. An agent offers to share his commission with a policyholder C. An agent offers tickets to a baseball game as an inducement to buy insurance D. An agent misrepresents policy benefits to convince a policyowner to replace policies

D. An agent misrepresents policy benefits to convince a policyowner to replace policies Rebating occurs when an insured is offered something of value in order to induce the sale of an insurance product. Both the offer and acceptance of a rebate are illegal.

To which of the following policies would the state regulation on illustrations NOT apply? A. A whole life policy with a guaranteed death benefit of $20,000 B. A group life policy C. A term policy D. An individual variable life policy

D. An individual variable life policy The life insurance illustrations regulation applies to all individual and group policies except variable life insurance; individual and group annuity contracts; credit life insurance; or life insurance policies and certificates with guaranteed scheduled death benefit of $10,000 or less, or illustrated death benefit of less than $15,000

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

D. Face amount

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 Misrepresentation is issuing, publishing, or circulating any illustration or sales material that is false, misleading or deceptive as to policy benefits or terms, the payments of dividends, etc. This includes oral statements.

Ronald is buying life insurance policies. He is unclear which one to buy, and his insurer explains the costs of similar plans, in addition to their basic features. Which rule requires the insurer to disclose such information? A. Insurance Disclosure Rule B. Informational Rule C. Policy Information Rule D. Life Solicitation Rule

D. Life Solicitation Rule The Life Solcitation Rule requires insurers to deliver at least certain minimum information designed to help buyers select the most appropriate life insurance plan for their needs, understand the basic features of the policy they are considering, and evaluate the relative costs of similar plans

Which of the following terms means a result of calculation based on the average number of months the insured is projected to live due to medical history and mortality factors? A. Mortality rate B. Risk exposure C. Morbidity D. Life expectancy

D. Life expectancy Life expectancy refers to a calculation based on the average number of months the insured is projected to live due to medical history and mortality factors using an arithmetic mean.

What type of license does an individual need to obtain in order to solicit and sell insurance? A. Business entity license B. Broker's license C. Insurer's license D. Producer's license

D. Producer's license Anyone who sells, solicits, negotiates, procures, renews, or binds insurance policies must hold a valid producer license for the class of insurance being transacted.

A transaction where new life insurance is purchased, and as part of the transaction, existing life insurance is lapsed and surrendered, is known as A. Conversion B. Conservation C. Renewal D. Replacement

D. Replacement Replacement means any transaction where new life insurance is to be purchased to replace an existing policy.

Which of the following statements about a suicide clause in a life insurance policy is TRUE? A. Suicide is covered for a specific period of years and excluded thereafter. B. Suicide is covered as long as the policy is in force. C. Suicide is excluded as long as the policy is in force D. Suicide is excluded for a specific period of years and covered thereafter.

D. Suicide is excluded for a specific period of years and covered thereafter. In most states, if death results from suicide within a certain period, the insurer is not obligated to pay the death benefit.

Who is the owner and who is the beneficiary on a Key Person Life Insurance policy? A. The employer is the owner and the key employee is the beneficiary B. The key employee is the owner and beneficiary C. The key employee is the owner and the employee is the beneficiary D. The employer is the owner and beneficiary.

D. The employer is the owner and beneficiary. With the key-person coverage, the business (the employer) is the applicant, owner, premium payer, and benficiary.

Which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner? A. An irrevocable beneficiary B. A buy-sell agreement C. Family term rider D. Third-party ownership

D. Third-party ownership Contracts that are owned by someone other than the insured are known as third-party ownership. Most policies involving third-party ownership are written in business situations or for minors in which the parent owns the policy.