Life Insurance Practice Questions

What level of authority is given to the Office of Insurance Regulation with respect to examination of insurer's activities to determine compliance Unfair Trade Practice laws? A. Absolute B. Voluntary C. Civil

A. Absolute *Florida statutes provide the Office of Insurance Regulation with an absolute right to examine the affairs of every person (insurers and licensees) involved in the business of insurance to see if they are engaged in any unfair trade practices.*

Which of the following would NOT be a violation of state insurance regulations? A. Agent C uses her license to write only business other than controlled. B. Agent D collects premiums due on policies and deposits the funds in his own personal account. C Agent A uses her license to write only insurance for herself and her immediate family. D. Agent B charges his clients a consulting fee, in addition to the premium for placing a policy.

A. Agent C uses her license to write only business other than controlled. *The purpose of a license is to primarily write business other than controlled business.*

A producer who fails to separate premium monies from his own personal funds is guilty of A. Commingling. B. Larceny. C. Embezzlement. D. Theft.

A. Commingling. *It is illegal for insurance producers to commingle premiums collected from the applicants with their own personal funds.*

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as: A. Contracts of adhesion. B. Unilateral contracts. C. Aleatory contracts. D. Binding contracts.

A. Contracts of adhesion. *Insurance policies are written by the insurer and submitted to the insured on a take-it-or-leave-it basis. The insured does not have any input into the contract, but simply adheres to the contract.*

Which of the following best describes the MIB? A. It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance. B. It is a government agency that collects medical information on the insured from the insurance companies. C. It is a member organization that protect insured against insolvent insurers. D. It is a rating organization for health insurance.

A. It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance. *The Medical Information Bureau (MIB) is a nonprofit trade organization which receives adverse medical information from insurance companies and maintains confidential medical impairment information on individuals.*

When replacing life insurance, the duties of the replacing insurance company include all of the following EXCEPT A. Maintaining a copy of the Notice Regarding Replacement and all sales proposals used for at least 5 years. B. Requiring from the agent with the application a copy of the Notice Regarding Replacement. C. Sending to the existing insurer a copy of the Notice Regarding Replacement immediately. D. Providing to each purchaser a Buyer's Guide and a Policy Summary.

A. Maintaining a copy of the Notice Regarding Replacement and all sales proposals used for at least 5 years. *Replacing insurers must maintain copies of the Notice Regarding Replacement and all sales proposals used for at least 3 years or until the conclusion of the next regular audit by the insurance department, whichever is later.*

Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance? A. Replacement rule B. Reinstatement rule C. Conversion rule D. Disclosure rule

A. Replacement rule *Anytime a new policy is issued that replaces or modifies existing insurance, a replacement form must be submitted to the ceding company.*

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. Required a premium increase each renewal. B. Built cash values. C. Required proof of insurability every year. D. Decreased death benefit at each renewal.

A. Required a premium increase each renewal. *Annually Renewable Term policies' premiums are adjusted each year to the insured's attained age; however, the policy may be guaranteed renewable. Death benefits remain level, and as with any term policy, there are no cash values.*

The clause that protects the proceeds of a life insurance policy from creditors after the death of the insured is known as the A. Spendthrift clause. B. Benefit protection clause. C. Incontestability clause. D. Beneficiary protection clause.

A. Spendthrift clause. *The spendthrift clause protects the policy proceeds from creditors of the policyowner or beneficiary.*

A person insured under a group life insurance policy can make an assignment of all or any part of the incidents of ownership conferred on the insured by the policy or by law, to any of the following EXCEPT A. The policyholder. B. A lender. C. A family member. D. The beneficiary.

A. The policyholder. *Any person insured under a group life insurance policy can make to any person, other than the policyholder, an assignment of all or any part of the incidents of ownership conferred or the insured by the policy or by law, including the right to exercise the conversion privilege and the right to name a beneficiary.*

An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have? A. Universal life B. Adjustable life C. Term life D. Limited pay

A. Universal life *Universal Life policies allow for policyholders to withdraw a limited portion of the policy's cash value. Each withdrawal, however, is usually charged, and the amount and frequency withdrawn are usually limited.*

If an agent does not notify the insurer of an address change, what is the maximum penalty that can be imposed for a one time offense? A. $180 B. $250 C. $500 D. $1,500

B. $250 *If the department is not notified within the required time period, a maximum fine of $250 will be imposed for the first offense; for subsequent offenses, either a minimum fine of $500 will be imposed or the agent's license will be suspended or revoked.*

Continuing education requirements must be met every A. 1 year. B. 2 years. C. 3 years. D. 5 years.

B. 2 years. *Each person must complete a minimum of 24 hours of continuing education courses every 2 years in courses approved by the Department.*

All of the following are TRUE of the federal tax advantages of a qualified plan EXCEPT A. Employee and employer contributions are not counted as income to the employee for income tax purposes. B. At distribution, all amounts received by the employee are tax free. C. Employer contributions are tax deductible as ordinary business expense. D. Funds accumulate on a tax-deferred basis.

B. At distribution, all amounts received by the employee are tax free. *Funds in a qualified plan accumulate on a tax-deferred basis; however, at distribution any amount received by the employee will be treated as ordinary income for tax purposes.*

An insurer that holds a Certificate of Authority in the state in which it transacts business is considered a/an A. Self-insurer. B. Authorized Insurer. C. Local insurer. D. Certified insurer.

B. Authorized insurer. *Insurers who meet the state's financial requirements and hold a Certificate of Authority to transact business in the state are considered authorized or admitted.*

What is the term for the fee a policyowner must pay to the insurance company to maintain coverage? A. Benefit B. Premium C. Installment D. Commission

B. Premium *The premium is what a policyholder pays the insurance company for insurance coverage.*

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

B. Single payment or periodic payments *Annuities are characterized by how they can be paid for: either a single payment (lump sum) or through payments in which the premiums are paid in installments over a period of time. Periodic payment annuities can be either level, in which the annuitant/owner pays a fixed installment, or the payments can be flexible, in which the amount and frequency of each installment varies.*

A customer with an existing life insurance contract is considering exchanging it for a newer contract. What Florida Insurance regulation should the customer's insurance agent consult? A. The Florida Insurance Guaranty Association B. The Florida Replacement Rule C. The Code of Ethics of the Florida Association of Insurance and Financial Advisers D. The Florida Life Insurance Solicitation Law

B. The Florida Replacement Rule *The Florida Replacement Rule established the procedures followed when a prospective life insurance buyer replaces an existing insurance contract with new insurance.*

How will a life insurance beneficiary designation naming a spouse be changed by divorce? A. Insurer's own policy rules will determine the result. B. The beneficiary designation will be voided. C. There be no change. D. The beneficiary will be changed to revocable.

B. The beneficiary designation will be voided. *If a former spouse of the policyowner is designated as the life insurance policy beneficiary, the beneficiary designation will be void at the time the policyowner's marriage is legally dissolved (divorce) or declared invalid by court order if the designation was made prior to the divorce.*

Which of the following is TRUE regarding the premium in term policies? A. Decreasing term policy will have a decreasing premium. B. The premium is level. C. Only level term policy has a level premium. D. The premium in term policies is not based on the insured's age.

B. The premium is level. *Regardless of the type of term insurance purchased, the premium is level throughout the term of the policy. Only the amount of the death benefit may change.*

What is the maximum allowed value of promotional gifts that an agent can give to a prospective insured? A. $20 B. $50 C. $100 D. Gifts are never allowed.

C. $100 *A licensed insurer or its agents may not give to insureds or prospective insureds for the purpose of advertising any articles of merchandise that have a value of more than $100 per insured in any calendar year.*

An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy? A. $20,000 B. $25,000 C. $50,000 D. The face amount will be determined by the insurer.

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

The minimum age for purchasing life insurance in Florida is A. 21 B. No age minimum. C. 15 D. 18

C. 15 *In Florida, the minimum legal age to enter into a life insurance contract is 15.*

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.*

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.*

What kind of policy does NOT typically require proof of insurability? A. Term insurance B. Individual insurance C. Group insurance D Variable universal life

C. Group insurance *Individual life insurance is written on a single life. The rate and coverage is based upon the underwriting of that individual. Group life insurance is written as a master policy, issued to the sponsoring organization, covering the lives of more than one individual member of that group. In group insurance, individual participants typically do not need to provide proof of insurability.*

Insurance contracts are agreements between which two parties? A. Attorneys for any parties involved in any contract B. Producers and consumers C. Insurer and policyowner D. Producer and insurer

C. Insurer and policyowner *Insurance contracts are between an insurer and a policyowner (an insured). For a consideration (the premium payment), the insurer agrees to indemnify the insured for losses resulting from specific causes.*

What is the purpose of a conditional receipt? A. It serves as proof that the applicant has been determined insurable. B. It is given only to applicants who fully prepay the premium. C. It is intended to provide coverage on a date prior to the policy issue. D. It guarantees that a policy will be issued in the amount applied for.

C. It is intended to provide coverage on a date prior to the policy issue. *Coverage commences on the date of the application or the date of a medical examination, which is later, on the condition that the applicant is determined to be insurable at the rate applied for.*

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

C. Level fixed *Variable Whole Life insurance is a level fixed premium investment-based product.*

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 - OASDI.*

All of the following are true regarding insurance policy loans EXCEPT A. The policy will terminate if the loan plus interest equals or exceeds the cash value of the policy. B. Policyowners can borrow up to the full amount of their whole life policy's cash value. C. Policy loans can be made on policies that do not accumulate cash value. D. The amount of the outstanding loan and interest will be deducted from the policy proceeds when the insured dies.

C. Policy loans can be made on policies that do no accumulate cash value. *The policy loan option is only found in policies that contain cash value.*

An insurance agent X has been found guilty of a felony and was sentenced to 3 years in prison. What would be the appropriate plan of action? A. Appeal to a higher court B. Do nothing C. Send a written notification to the department of insurance D. Immediately turn in his license

C. Send a written notification to the Department of Insurance *Agents must notify the Department of Insurance in writing 30 days after being found guilty of a felony or a crime punishable by imprisonment of 1 year or more.*

An insurance agent B likes to add additional coverages to applicants' policies and charge them for such coverages without their knowledge. The agent is guilty of A. Rebating. B. Defamtion. C. Sliding. D. Misrepresentation.

C. Sliding. *Charging an applicant for a specified additional coverage or product, in addition to the cost of the coverage applied for, without the applicant's knowledge or consent.*

In accordance with the Code of Ethics, agents must provide a completed application to A. The soliciting agent and the insured. B. The Florida Insurance Guaranty Association and the Director C. The prospective insured and the insurer. D. The Director and the insurer.

C. The prospective insured and the insurer. *Licensed agents should submit applications to the insurer with which he or she is appointed and to the prospective insured.*

In order for a debtor group to qualify for group life insurance, what should be the minimum number of participants joining the plan every year? A. 10 B. 25 C. 50 D. 100

D. 100 *Life insurance policies can be issued to debtor groups if the group of eligible debtors is receiving new entrants at the rate of at least 100 persons a year.*

What is the waiting period on a Waiver of Premium rider in life insurance policies? A. 30 days B. 3 months C. 5 months D. 6 months

D. 6 months *Most insurers impose a 6-month waiting period from the time of disability until the first premium is waived.*

Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company? A. Adhesion B. Subrogation C. Warranty D. Aleatory

D. Aleatory *An insurance contract is an aleatory contract in that it requires a relatively small amount of premium for a large risk.*

Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement? A. Term insurance only B. Permanent insurance only C. Universal life insurance only D. Any form of life insurance

D. Any form of life insurance *Any form of Life insurance may be used to fund a buy-sell agreement.*

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 producer 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. *Any changes to information on an application must be initialed by the applicant.*

Who does the secondary notice provision protect? A. The policyowners B. Secondary addressees C. The insurer D. Elderly insureds

D. Elderly insureds *The secondary notice provision protects elderly insureds, and prevents the policy from lapsing for nonpayment of premium after the grace period without the insured notifying the policyowner and a designated secondary addressee of the impending lapse in coverage.*

When the insured selects 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. *With this option, 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.*

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check form 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. Reciprocal B. Nonprofit service organization C. Stock D. Mutual

D. Mutual *Funds not paid out after paying claims and other operating costs are returned to the policyowners in the form of a dividend. If all funds are paid out, no dividends are paid.*

The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this? A. Paid-up addition B. Accumulation at interest C. Cash option D. Reduction of premium

D. Reduction of premium *The Reduction of Premium option allows the policyholder to apply policy dividends toward the next year's premium. The dividend is subtracted from the premium amount, yielding the new premium due for the next year.*

Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled? A. Payor Benefit B. Jumping Juvenile C. Juvenile Premium Provision D. Waiver of Premium

A. Payor Benefit *If the payor (usually a parent or guardian) 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.*

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

B. Standard *The three ratings classifications that denote the risk level of insureds are standard, substandard, and preferred. This classification system helps insurers to decide if an insured should pay a higher premium.*

If the annuitant dies during the accumulation period, who will receive the annuity benefits? A. The annuitant's estate B. The beneficiary C. The annuity owner D. The insurance company

B. The beneficiary *If the annuitant dies during the accumulation period, the beneficiary receives benefits from the annuity: either the amount paid into the plan or the cash value - whichever is greater.*

Which of the following is INCORRECT regarding a $100,000 20-year level term policy? A. If the insured dies before the policy expired, the beneficiary will receive $100,000. B. The policy will expire at the end of the 20-year period. C. At the end of 20 years, the policy's cash value will equal $100,000. D. The policy premiums will remain level for 20 years.

C. At the end of 20 years, the policy's cash value will equal $100,000. *Term policies do not develop cash values. All other statements are true.*

What term best describes the act of withholding material information that would be crucial to an underwriting decision? A. Withholding B. Leading C. Breach of warranty D. Concealment

D. Concealment *Concealment occurs when a person withholds a material fact that is crucial to making a decision. In insurance, this involves withholding information that would be important for making underwriting decisions.*

Which nonforfeiture option provides coverage for the longest period of time? A. Extended term B. Paid-up option C. Accumulated at interest D. Reduced paid-up

D. Reduced paid-up *The reduced paid-up nonforfeiture option would provide protection until the insured reaches 100, but the face amount is reduced to what the cash would buy.*

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

B. Annually Renewable Term *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.

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

B. 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.*

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

D. If the father is disabled for more than 6 months. *Payor benefit only pays if the owner, the father in this example, is disabled for at least 6 months.*

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

D. Increasing *Return of Premium (ROP) life insurance is an increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid.*

If the insurance policy has an irrevocable beneficiary designation, A. The beneficiary cannot be charged for at least 2 years. B. The owner can always change the beneficiary at will. C. The beneficiary cannot be changed. D. The beneficiary can only be changed with written permission of the beneficiary.

D. The beneficiary can only be changed with written permission of the beneficiary. *If a policy has an irrevocable beneficiary designation the beneficiary can only be changed with written permission of the beneficiary.

Which of the following is TRUE about nonforfeiture values? A. They are required by state law to be included in the policy. B. They are option provisions. C. A table showing nonforfeiture values for the next 10 years must be included in the policy. D. Policyowners do not have the authority to decide how to exercise nonforfeiture values.

A. They are required by state law to be included in the policy. *Nonforfeiture values are required by state law to be included in the policy, and cannot be altered by the policyowner. A table showing the nonforfeiture values for the next 20 years must be included in the policy.*

If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant no later than A. With the policy. B. Upon issuance of the policy. C. Within 30 days after the first premium payment was collected. D. Prior to filling out an application for insurance.

A. With the policy. *If a life insurance policy contains a free-look period of at least 10-days, the buyer's guide can be delivered with the policy. If it doesn't the buyer's guide must be delivered prior to accepting the initial premium.*

Which of the following would be an example of an unfair claims settlement practice? A. Denying a claim within 10 days of receipt of proof of loss B. Failing to acknowledge a claim within 30 days C. Offering a quick settlement of a claim D. Suggesting negotiations in settling the claim

B. Failing to acknowledge a claim within 30 days *Insurers must either affirm or deny a claim within a reasonable amount of time, but no later than 30 days.*

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

B. 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 constant purchasing power, and therefore providing protection against inflation.*

Which of the following is NOT true regarding the accumulation period of an annuity? A. It is the period during which the annuity payments earn interest. B. It is the period over which the owner makes payments into an annuity. C. It is also known as the pay-in period. D. It would not occur in a deferred annuity.

D. It would not occur in a deferred annuity. *The "accumulation period" is the period of time over which the annuity owner makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred (which would be the case in a deferred annuity).*

During replacement of life insurance, a replacing insurer must do which of the following? A. Guarantee a replacement for each existing policy B. Designate a new producer for a replaced policy C. Send a copy of the Notice Regarding Replacement to the Department of Insurance D. Obtain a list of all life insurance policies that will be replaced

D. Obtain a list of all life insurance policies that will be replaced. *The replacing insurance company must require from the producer a list of the applicant's life insurance policies to be replaced and a copy of the replacement notice provided to the applicant, and send each existing insurance company a written communication advising of the proposed replacement.*

If a life insurer holds the proceeds of any policy it issues, which of the following is true? A. The proceeds will be more likely to be subject to a creditor's claims against a beneficiary. B. Death benefits will be increased as an incentive. C. Premiums will be decreased as an incentive. D. The proceeds may be exempt from any creditor's claims against a beneficiary other than the policy owner.

D. The proceeds may be exempt from any creditor's claims against a beneficiary other than the policy owner. *A life insurer may hold the proceeds of any policy it issues, provided the insured agrees. These proceeds may be exempt from any creditor's claims against a beneficiary other than the policy owner.*

Under what circumstances can an agent's appointment be transferred to another person? A. When another person works for the same appointing insurer B. With the Commissioner's written approval C. If the agent's license has been temporarily suspended D. Under no circumstances

D. Under no circumstances *Any issued appointment is valid only for the person named and is not transferable to another person.*

On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. The company is guilty of A. Concealment. B. Unfair claim practice. C. Rebating. D. Misrepresentation.

D. Misrepresentation. *Issuing or circulating any sales material that is false or misleading would be considered misrepresentation and is illegal.*

What method do insurers use to protect themselves against catastrophic losses? A. Pro rata liability B. Risk management C. Reinsurance D. Indemnity

C. Reinsurance *Insurers use reinsurance to protect themselves from catastrophic losses. This is a method where the reinsurer indemnifies the ceding insurer for part or all of the losses it sustains related to a policy issued previously.*

Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report A. Must be informed of the source of the report. B. Are entitled to obtain a copy of the report from the party who ordered it. C. Must be advised that a copy of the report is available to anyone who requests it. D. May sue the reporting agency in order to get inaccurate data corrected.

A. Must be informed of the source of the report. *Under the Fair Credit Reporting Act, if an insurance policy is declined or modified because of information contained in a consumer report, the consumer must be advised and provided with the name and address of the reporting agency.*

Which of the following applicants would NOT qualify for a Keogh Plan? A. Someone who works 400 hours per year B. Someone who has been employed for more than 12 months C. Someone who is over 25 years of age D Someone who works for a self-employed individual

A. Someone who works 400 hours per year *A person must have worked at least 1,000 hours per year to be eligible for a Keogh Plan.

An individual has been diagnosed with Alzheimer's disease. He is insured under a life insurance policy with the accelerated benefits rider. Which of the following is true regarding taxation of the accelerated benefits? A. The entire living benefit is considered taxable. B. A portion of the benefit up to a limit is tax free; the rest is taxable income. C. Principal is tax free, but interest is taxed. D. The entire benefit will be received tax free.

B. A portion of the benefit up to a limit is tax free; the rest is taxable income. *When accelerated benefits are paid to a chronically ill insured, they are tax free up to a certain limit. Any amount received in excess of this dollar limit must be included in the insured's gross income.*

What are the 2 offices of the Financial Services Commission? A. The Department of Insurance and the Department of Finance B. The Office of Insurance Regulation and the NAIC C. The Office of Financial Regulation and the office of Insurance Regulation D. The Legislative Office and the State Court Office

C. The Office of Financial Regulation and the Office of Insurance Regulation *The following 2 offices are established within the Commission: The Office of Financial Regulation and the Office of Insurance Regulation, which specifically regulates the business of insurance in the state.*

If a claim is made on a policy during the grace period, an insurer is allowed to deduct the overdue premium and to charge interest. What is the maximum allowed interest rate? A. 2% B. 4% C. 6% D. 8%

D. 8% *The time that may elapse between a premium's due date and its eventual payment is called the grace period. If a claim is made on a policy during one of these grace periods, an insurer may deduct the amount of the premium due and up to 8% of interest per year from the settlement.*

Under a SIMPLE plan, which of the following is TRUE regarding taxation on both contributors and earning? A. Taxes must be paid in full. B. Employer's matching contribution can be 50% of employees salary. C. 75% of employee's contributions are taxed. D. They are tax deferred until withdrawn.

D. They are tax deferred until withdrawn. *Taxation is deferred on both contributions and earnings until funds are withdrawn.*

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

C. $50,000 *The cash value of a variable life insurance policy is not guaranteed. However, even if investments devalue significantly, they cannot be lower than the initial guaranteed benefits amount.*

Applications to an insurer must include all of the following information, EXCEPT A. Credit history report B. Name of the agent C. License identification number of the agent D. Name of the insurer

A. Credit history report *Licensed agents may not submit applications to an insurer or furnish a copy of an application to a prospective insured unless the name of the insurer is legibly typed or printed on the first page of the application form at the time coverage is bound or the premium is quoted. The application must also disclose the name and license identification number of the agent as shown on the agent's license.*

The automatic premium loan provision is activated at the end of the: A. Grace period. B. Free-look period. C. Elimination period. D. Policy period.

A. Grace period. *Provided there is sufficient cash value in the policy, this provision triggers a loan at the end of the grace period to keep a policy in force.*

Two attorneys operate their practice as a partnership. They want to start a program through their practice that will provide retirement benefits for themselves and three employees. They would likely choose A. HR-10 (Keogh Plan). B. Section 457 Deferred Compensation Plan C. 403(b) plan. D. 401(k) plan.

A. HR-10 (Keogh Plan). *HR-10 (Keogh Plans) are plans specifically for self-employed and their employees.*

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

A. Its premium steadily decreases over time, in response to its growing cash value. *Straight Life policies charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit.*

In which of the following instances would the premium be tax deductible? A. Premiums paid by an employer on a $30,000 group term life insurance plan for employees. B. Premiums paid by an individual on his/her own life insurance C. Premiums paid by a mother on her son's policy D. Premiums paid by an employer on the life of a key person

A. Premiums paid by an employer on a $30,000 group term life insurance plan for employees *As a general rule, premiums paid for life insurance are not tax deductible. The exception to this rule is when an employer buys group term life insurance for his employees since it is considered a business expense.*

Which of the following statements is INCORRECT? A. Replacing insurance policies for the purpose of making commissions is legal. B. Misrepresenting the true nature or facts for the purpose of making commissions is legal. C. It is illegal to be involved in any activity of boycott, coercion, or intimidation that is intended to restrict fair trade or to create a monopoly. D. Discrimination in rates, premiums policy benefits, etc. for persons within the same class or with the same life expectancy is illegal.

A. Replacing insurance policies for the purpose of making commission is legal. *Churning is defined as replacing insurance policies for the sole purpose of making commissions, and it is illegal.*

It would be considered unfair discrimination to ask an insurance applicant about which of the following and then use that information as a rating factor to determine insurability? A. Sexual orientation B. Age C. Gender D. Address

A. Sexual orientation *It would be considered unfair discrimination to ask an applicant for their sexual orientation, as well as using sexual orientation as a rating factor to determine insurability.*

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

A. The policyowner is entitled to policy loans. *Whole life policies offer level premium based on the issue age, guaranteed, level death benefit, cash value that is scheduled to equal the face amount at the insured's ago 100, and living benefits, which include policy loans.*

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

A. To allow the consumer to compare the costs of different policies. *The buyer's guide provides generic information about life insurance policies and allows the consumer to compare the costs of different policies. The policy summary provides specific information about the issued policy, as well as the insurer's information.*

An insured under a life insurance policy has been diagnosed 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 receive a percentage of the policy's face value from the person who purchases the policy.*

In the state of Florida, it is illegal for a licensee's commissions from controlled business to exceed what percentage of the total in a given year? A. 35% B. 50% C. 60% D. 20%

B. 50% *A license will not be permitted to exist if the department finds that during any 12-month period, aggregate commissions or other compensation accruing in favor of the licensee's insurable interest have exceeded 50% of the aggregate amount of commissions and compensation accruing in the licensee's favor during the same period as to all insurance coverage procured through him/her.*

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

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

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

B. Adjusted to the insured's age at the time of renewal. *If a level term product is renewed at the end of the term period the premium will be based upon the attained age of the insured.*

Which of the following is another term for an authorized insurer? A. Legal B. Admitted C. Certified D. Licensed

B. Admitted *Insurers who meet the state's financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer.*

An insured pays an annual premium to his insurer. In return, the insurer promises to pay benefits in accordance with the terms of the contract. This is called: A. Acceptance B. Consideration C. Conditions D. Utmost good faith

B. Consideration *"Consideration" is the value offered by the insured to the insurer, and vice versa. The insured makes accurate statements in the application and remits premium payments. In exchange, the insurer provides benefits as stipulated in the contract.*

An insurer publishes intimidating brochures that portray the insurer's competition as financially and professionally unstable. Which of the following best describes this act? A. Legal, provided that the other insurers are paid royalties for the usage of their names. B. Illegal under any circumstances C. Legal, provided that the information can be verified D. Illegal until endorsed by the Guaranty Association

B. Illegal under any circumstances *When a company criticizes the financial situation of another company with the intention of injuring that company, it has committed an illegal trade practice called defamation.*

Which of the following entities protects policyowners, insureds, and beneficiaries under insurance contracts when insurers fail to perform contractual obligations due to financial impairment? A. Consumer Protection Agency B. Insurance Guaranty Association C. Insurance Consumer Protectorate D. Insurance Solvency Association

B. Insurance Guaranty Association *Guaranty Associations are created to protect policyowners, insureds, and beneficiaries under life insurance policies, health insurance policies, annuity contracts, and supplemental contracts when insurers fail to perform contractual obligations due to financial impairment.*

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

B. 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 back all premiums plus interest, and may be required to repay any outstanding loans and interest.*

Death benefits payable to a beneficiary under a life insurance policy are generally A. Exempt from income taxation if over $10,000. B. Not subject to income taxation by the Federal Government. C. Subject to income taxation by the Federal Government. D. Exempt from income taxation if under $10,000

B. Not subject to income taxation by the Federal Government. *When premiums are paid with after tax dollars, the death benefit is generally not subject to federal income taxation.*

When an insurer terminates an agent's appointment, they must do all of the following EXCEPT A. Make sure that the agent's contract rights are not violated. B. Provide a 30-day advance notice to the Commissioner. C. Provide a 60-day advance notice to the agent. D. File a written notice with the Department of Insurance within 30 days of termination.

B. Provide a 30-day notice to the Commissioner. *An appointment entity may terminate an agent's appointment at any time, subject to an appointee's contract rights and with a 60-days advance notice. Once the appointment is terminated, the appointing entity must file a written notice with the department of insurance within 30 days.*

It would be considered unfair discrimination to ask an insurance applicant about which of the following and then use that information as a rating factor to determine insurability? A. Address B. Sexual orientation C. Age D. Gender

B. Sexual orientation *It would be considered unfair discrimination to ask an applicant for their sexual orientation, as well as using sexual orientation as a rating factor to determine insurability.*

Who examines the books and records of insurance companies in Florida? A. The Governor B. The Chief Financial Officer C. The NAIC D. The Commissioner of Insurance

B. The Chief Financial Officer *The CFO and the Office of Insurance Regulation have the right to examine the affairs of every person or entity authorized to transact insurance in this state. Examinations must be conducted at least once every 5 years.*

The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true? A. The contract can be issued without an annuitant. B. The annuitant must be a natural person. C. A corporation can be an annuitant as long as it is also the owner. D. A corporation can be an annuitant as long as the beneficiary is a natural person.

B. The annuitant must be a natural person. *Owners of annuities can be individuals or entities like corporations and trusts, but the annuitant must be a natural person, whose life expectancy is taken into consideration for the annuity.*

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

B. The plan is funded by permanent insurance only. *Key Person coverage may be funded by any type of life insurance.*

If an insured continually uses the automatic premium loan option to pay the policy premium, A. The insurer will increase the premium amount. B. The policy will terminate when the cash value is reduced to nothing. C. The face amount of the policy will be reduced by the automatic premium loan amount. D. The cash value will continue to increase.

B. The policy will terminate when the cash value is reduced to nothing. *This option, usually elected at the time fo application, provides that in case of a possible policy lapse, the premium will be automatically paid from the contract's guaranteed cash value. However, once the cash value is exhausted, the policy will terminate.*

Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract? A. Representation B. Warranty C. Concealment D. Indemnity

B. Warranty *A warranty in insurance is a statement guaranteed to be true. When an applicant is applying for an insurance contract, the statements he or she makes are generally not warranties but representations. Representations are statements that are true to the best of the applicant's knowledge.*

An insured purchased a 15-year level term life insurance policy with a face amount of $100,00. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, 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.*

Group life insurance is a single policy written to provide coverage to members of a group. Which of the following statements concerning group life is CORRECT? A. Coverage cannot be converted when an individual leaves the group. B. Premiums are determined by age, occupation, and individual underwriting. C. 100% participation of member is required in noncontributory plans. D. Each member covered receives a policy.

C. 100% participation of members is required in noncontributory plans. *If the employer pays all of the premium then all employees must be included.*

The term "illustration" in a life insurance policy refers to: A. Pictures accompanying a policy B. Charts and graphs C. A presentation of non-guaranteed elements of a policy D. A depiction of policy benefits and guarantees

C. A presentation of non-guaranteed elements of a policy *The term "illustration" means a presentation or depiction that includes non-guaranteed elements of a policy of individual or group life insurance over a period of years.*

What license or licenses are required to sell variable annuities? A. Only a securities license B. No license is required C. Both a life insurance license and a securities license D. Only a life insurance license

C. Both a life insurance license and a securities license *Agents are required to have both a life insurance license and a securities license to sell variable annuities.*

How are state Insurance Guaranty Associations funded? A. By NAIC B. By the Government C. By their members - authorized insurers D. By the Department of Insurance

C. By their members- authorized insurers *Guaranty Associations are funded by their members: all authorized insurers are required to contribute to a fund to provide for the payment of claims for insolvent insurers.*

Which of the following terms is used to name the non-taxed return of unused premiums? A. Interest B. Surrender C. Dividend D. Premium return

C. Dividend *The return of unused premiums is called a dividend. Dividends are not considered to be income for tax purposes, since they are the return of unused premiums.*

During partial withdrawal from a universal life policy, which portion will be taxed? A. Principal B. Loan C. Interest D. Cash value

C. Interest *During the withdrawal, the interest earned on the withdrawn cash value may be subject to taxation.*

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

C. Level term *A 20-year term policy is written to provide a level death benefit for 20 years.*

Which of the following is NOT considered a misrepresentation as it pertains to unfair trade practices? A. Exaggerating the benefits provided in the policy B. Stating that the competitors will arbitrarily increase their premiums each year. C. Making comparisons between different policies D. Stating that the insurance policy is a share of stock

C. Making comparisons between different policies *Making accurate comparisons of policies is not illegal.*

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. Changed of insured rider.

C. Other-insured rider. *The other-insureds rider is useful in providing 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.*

Another name for a substandard risk classification is: A. Declined B. Elevated C. Rated D. Controlled

C. Rated *Substandard risk classification is also referred to as "rated" since these policies could be issued with the premium rated-up, resulting in a higher premium.*

An insured will be allowed to reactivate her lapsed life insurance policy if action is taken within a certain period of time, and proof of insurability is provided. Which policy provision allows this? A. Incontestable clause B. Grace period C. Reinstatement provision D. Waiver of premium provision

C. Reinstatement provision *A lapsed policy may be reinstated within 3 years by paying back premiums, with interest, and providing insurability.*

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

C. Securities *Variable products are governed in part by the Securities and Exchange Commission; therefore, agents selling variable life policies must also secure a securities license.*

An agent's appointment has been denied. Which of the following is true? A. All application fees will be refunded. B. Appointment fees will be refunded. C. State taxes may be refunded upon a written request. D. No refunds will be issued.

C. State taxes may be refunded upon a written request. *Appointment fees are nonrefundable. However, if the applicant submits a written request within 60 days after the denial or disapproval of an appointment, the department will refund any state or county taxes received in connection with the application for the appointment.*

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

C. They must be part of the contract. *An illustration may not be altered by an agent and must clearly state that it is not part of the contract. It is legal to list non-guaranteed values in the contract, but they must be specifically labeled as projected, not guaranteed values.*

Social Security was created to provide all of the following benefits EXCEPT: A. Disability income. B. Retirement income. C. Unemployment income. D. Survivor's benefits.

C. Unemployment income. *Social Security is designed to provide protection against financial loss due to old age, disability, or death. It also provides income during retirement.*

The accelerated benefits provision will provide for an early payment of the death benefit when the insured: A. Needs to borrow money. B. Has earned enough credits. C. Becomes disabled. D. Becomes terminally ill.

D. Becomes terminally ill. *The accelerated benefits provisions allow the owner to be advanced a significant portion of the death benefit when the insured is terminally ill.*

Which of the following authorities grants and revokes licenses? A. Federal Insurance Bureau B. National Association of Insurance Commissioners (NAIC) C. Guaranty Association D. Department of Financial Services

D. Department of Financial Services *The Department is responsible for issuing, reissuing, and terminating licenses*

According to the Fair Credit Reporting Act, all of the following would be considered negative information about a consumer EXCEPT: A. Tax delinquencies. B. Late payments. C. Failure to pay off a loan. D. Disputes regarding consumer report information.

D. Disputes regarding consumer report information. *As defined by the Act, negative information includes information regarding a customer's delinquencies, late payments, insolvency or any other form of default. Customer disputes are not considered negative information, and, in fact, must be included in consumer reports.*

Which is TRUE about the cash surrender nonforfeiture option? A. After the cash surrender, the insured is covered for a grace period of one month. B. The policy remains active for some time after the policyholder opts for cash surrender. C. The policyholder receives the original cash value of the policy. D. Funds exceeding the premium paid are taxable as ordinary income.

D. Fund exceeding the premium paid are taxable as ordinary income. *The insurers surrender the policy at its current cash value. Only any excess of value is taxable as income. Once the policyholder opts for cash surrender, the policy is immediately inactive.*

What is the other term for the cash payment settlement option? A. Principal amount B. Face amount C. Proceeds D. Lump sum

D. Lump sum *Upon the death of the insured, the contract is designed to pay the proceeds in cash, called a lump sum.*

All of the following are true regarding rebates EXCEPT A. Rebates are only allowed if specifically stated in the policy. B. Rebating can be anything of monetary value given as an inducement to purchase insurance. C. Dividends are not considered to be rebates. D. Rebates are allowed if it is in the best interest of the client.

D. Rebates are allowed if it is in the best interest of the client. *A rebate is an illegal act which involves returning something of value to the client as an inducement to buy, such as the commission. Rebates are only allowed if specifically stated in the policy. Insurance dividends are not considered rebates as the IRS considers it as a return of overpaid premium.*

To sell variable life insurance policies, an agent must receive all of the following EXCEPT: A. FINRA registration. B. A securities license. C. A life insurance license. D. SEC registration.

D. SEC registration. *Agents selling variable life products must be registered with FINRA, have a securities license, and must be licensed within the state to sell life insurance. SEC registration is for securities, not agents.*

Which of the following is INCORRECT concerning a noncontributory group plan? A. They help to reduce adverse selection against the insurer. B. They require 100% employee participation. C. The employer pays 100% of the premiums. D. The employees receive individual policies.

D. The employees receive individual policies. *The employer receives a master policy, and employees receive a certificate of insurance.*

Which of the following determines the cash value of a variable life policy? A. The company's general account B. The policy's guarantees C. The premium mode D. The performance of the policy portfolio

D. The performance of the policy portfolio *The cash value of a variable life policy is not guaranteed and fluctuates with the performance of the portfolio in which the premiums have been invested by the insurer.*

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

D. When the insured reaches age 100 *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.*

Which of the following types of policies will provide permanent protection? A. Credit life B. Term life C. Group life D. Whole life

D. Whole life *Whole life policies are referred to as permanent protection, since as long as the premium is paid coverage will continue for the life of the insured. Both the premiums and death benefit are guaranteed and will remain level for life.*

Which of the following is NOT an example of a business use of a Life Insurance? A. Buy-sell Funding B. Executive Bonuses C. Key Person D. Workers Compensation

D. Workers Compensation *Workers Compensation is a benefit payable when a worker is injured by a work-related injury, regardless of fault or negligence. It is not considered a business use of insurance.*

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

A. Its premium steadily decreases over time, in response to its growing cash value. *Straight Life policies charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit.*

If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a A. Settlement option. B. Nontaxable exchange. C. Nonforfeiture option. D. Rollover.

A. Settlement option. *A settlement option is exercised when an immediate annuity is purchased with the face amount at death or with the cash value at surrender.*

Which of the following is NOT the consideration in a policy? A. The application given to a prospective insured B. Something of value exchanged between parties C. The premium amount paid at the time of application D. The promise to pay covered losses

A. The application given to a prospective insured *Consideration is something of value that is transferred between the two parties to form a legal contract.*

Which of the following is true regarding the agent's appointments? A. A person only needs 1 appointment for all the insurers he/she represents if it's in the same line of authority. B. A person does not need to be licensed to hold an insurance appointment. C. A person may hold several appointments at one time. D. A person can only have one appointment.

C. A person may hold several appointments at one time. *At any one time, the same individual agent may hold any or all categories of appointments for which he or she is qualified and licensed. However, an agent must have a separate appointment for each insurer.*

Which of the following is TRUE for both equity indexed annuities and fixed annuities? A. They have a guaranteed minimum interest rate. B. They are both tied to an equity index. C. Both are considered to be more risky than variable annuities. D. They invest on a conservative basis.

A. They have a guaranteed minimum interest rate. *While equity indexed annuities earn higher interest rates than fixed annuities, both types of annuities guarantee a specific minimum interest rate.*

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

B. Annually Renewable Term *Annually renewable term is the purest form of term insurance. The death benefit remains level, but the premium increases each year with the insured's age. In decreasing policies, while the face amount decreases, the premium remains constant throughout the life of the contracts.*

If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered to be A. Approved B. Authorized C. Certified D. Qualified

B. Authorized *Insurers who meet the state's financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer.*

In terms of Social Security, what is the interval spanning between the day when the youngest child of a family turns 16 and before the surviving spouse may receive retirement benefits? A. Accumulation Period B. Blackout Period C. Nonpayment Interval D. Latent Interval

B. Blackout Period *The interval spanning between the day when the youngest child of a family turns 16 and before the surviving spouse turns age 60 is called a "Blackout Period." No benefits are paid during this time.*

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? 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 * The triple indemnity accidental death rider obligates the company to pay three times the face amount of the policy if the insured dies as a result of an accident. The death must be accidental and not contributed to by any other factors and must occur within 90 days of the accident. In this case, 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 individual purchased a $100,000 Joint Life policy on himself and his wife. Eight years later, he died in an automobile accident. How much will his wife receive from the policy? A. Nothing B. $50,000 C. $100,000 D. $200,000

C. $100,000 *In joint life policies, the death benefit is paid upon the first death only.*

The term "fixed" in a fixed annuity refers to all of the following EXCEPT: A. Equal annuity payments B. Amount and length of payments C. Death benefit D. Guaranteed rate of interest

C. Death benefit *A fixed annuity is fixed in the sense that it provides a guaranteed minimum rate of interest and income payments that do not vary from one to the next. The company also guarantees the specified dollar amount for each payment and the length of the payout period. Annuities do not provide a death benefit.*

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.*

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

C. Signed waiver of premium *The policy does not go into effect until the premium has been collected. If the premiums was not collected at the time of the application, the producer may also be required to get a Statement of Good Health from the applicant at the time of policy delivery. Waiver of premium is a rider that can be added to a life insurance policy, and not something to be obtained from the applicant.*

How are state insurance Guaranty Associations funded? A. By the Department of Insurance B. By NAIC C. By the Government D. By their members - authorized insurers

D. By their members - authorized insurers *Guaranty Associations are funded by their members: all authorized insurers are required to contribute to a fund to provide for the payment of claims for insolvent insurers.*

An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation? A. Variable life B. Universal life C. Whole life D. Decreasing term

D. Decreasing term *A decreasing term policy's face amount decreases as the amount of debt is reduced.*

Which of the following is NOT a responsibility of the Office of Insurance Regulation? A. Enforcing the Insurance Code B. Issuing certificates of authority C. Instituting legal proceedings D. Enacting new insurance laws.

D. Enacting new insurance laws *New laws are enacted by the state legislature.*

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

D. If the insured lives to age 100 *Whole life insurance provides protection for the entire lifetime of the insured. If the insured lives to the age of 100, the company pays the face amount of the policy to the policyowner (usually the insured).*

Which of the following best describes annually renewable term insurance? A. It requires proof of insurability at each renewal. B. Neither the premium nor the death benefit is affected by the insured's age. C. It provides an annually increasing death benefit. D. it is level term insurance.

D. It is level term insurance. *Annually renewable term is a form of level term insurance that offers the most insurance at the lowest cost.*

In which of the following situations is it legal to limit coverage based on marital status? A. Excessive number of divorces, as defined by the Insurance Code B. Legal separation during the application process C. Divorce within the last six months of applying for insurance D. It is never legal to limit coverage based on marital status.

D. It is never legal to limit coverage based on marital status. *Availability of insurance benefits or coverage may not be denied based on sex or marital status. Marital status may be considered for the purpose of defining persons eligible for dependent benefits.*

An applicant who receives a preferred risk classification qualifies for: A. Lower premiums than a person who receives a standard risk. B. Dividends payable for lack of claims. C. Higher premiums than a person who receives a sub-standard risk. D. Higher premiums than a person who receives a standard risk.

A. Lower premiums than a person who receives a standard risk. *The preferred risk category is reserved for those persons with a superior physical condition, lifestyle, and habits.*

Which of the following is an agreement between an insured and an insurer, where the insurer agrees to indemnify the insured for specific losses in exchange for a premium? A. The indemnity clause B. The insurance contract C. The insurance guaranty D. Reciprocity

B. The insurance contract *Insurance contracts are defined as the agreements made between an insured and an insurer, where the insurer promises to indemnify the insured for covered losses, in exchange for a premium. Both parties are bound by the conditions of the contract.*

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

D. When an insurer's underwriter approves coverage *In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy.*