Life Insurance State Exam
d. Annually Renewable Term policy with a cash value account
A Universal Life Insurance policy is best described as a/an a. Variable Life with a cash value account. b. Whole Life policy with two premiums: target and minimum. c. Flexible Premium Variable Life policy. d. Annually Renewable Term policy with a cash value account.
c. Disputes regarding consumer report information
According to the Fair Credit Reporting Act, all of the following would be considered negative information about a consumer EXCEPT a. Late payments b. Failure to pay off a loan c. Disputes regarding consumer report information d. Tax delinquencies
a. conditional
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. Common Disaster
An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision? a. Common Disaster b. Accidental Death c. Survivor Life d. Second-to-Die
c. Conditions
Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT a. Legal purpose. b. Offer and acceptance. c. Conditions. d. Consideration.
c. 100% participation of members is required in noncontributory plans.
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 members is required in noncontributory plans. d. Each member covered receives a policy.
c. The beneficiary can only be changed with written permission of the beneficiary.
If a life insurance policy has an irrevocable beneficiary designation, a. The owner can always change the beneficiary at will. b. The beneficiary cannot be changed. c. The beneficiary can only be changed with written permission of the beneficiary. d. The beneficiary cannot be changed for at least 2 years.
b. To allow the aggrieved party to be heard
If the Commissioner believes a producer has committed a violation of an insurance law, the Commissioner will hold a hearing. What is the purpose of the hearing? a. To officially revoke the producer's license b. To allow the aggrieved party to be heard c. To allow the public to participate in the disciplinary procedures d. To deliver a cease and desist order to the violator
a. Unemployment income
Social Security was created to provide all of the following benefits EXCEPT a. Unemployment income. b. Survivor's benefits. c. Disability income. d. Retirement income.
d. Annually Renewable Term
The LEAST expensive first-year premium is found in which of the following policies? a. Increasing Term b. Decreasing Term c. Level Term d. Annually Renewable Term
b. Insurance companies from adverse selection by high risk persons.
The Medical Information Bureau (MIB) was created to protect a. Medical examiners that perform insurance physical examinations. b. Insurance companies from adverse selection by high risk persons. c. Insurance departments from lawsuits by policyowners. d. Insureds from unreasonable underwriting requirements by the insurance companies.
c. Set premium rates
The Ownership provision entitles the policyowner to do all of the following EXCEPT a. Assign the policy. b. Designate a beneficiary. c. Set premium rates. d. Receive a policy loan.
b. 6 credits
The minimum 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.
c. Lower
The premium of a survivorship life policy compared with that of a joint life policy would be a. As high. b. Half the amount c. Lower. d. Higher.
b. Renewable term
The regulations regarding replacement apply to which of the following? a. Group life b. Renewable term c. Replacement of existing policy by the same insurer d. Credit life
b. 6 credits
To attain currently insured status under Social Security, a worker must have earned at least how many credits during the last 13 quarters? a. 4 credits b. 6 credits c. 10 credits d. 40 credits
b. When the creditor is named as the beneficiary of the proceeds by the insured employee
Under what circumstance will the proceeds payable under an employee's group life be taken to pay to a creditor of the employee? a. When the proceeds are paid to the employee b. When the creditor is named as the beneficiary of the proceeds by the insured employee c. When no other person or entity is named as beneficiary of the proceeds d. When the proceeds are paid to the employee's estate
d. Issue the policy anyway and pay the face value to the beneficiary.
When Y applied for insurance and paid the initial premium on August 14, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the risk or classify it other than as standard. Y was killed in an automobile accident on August 22, before the policy was issued. In this case, the insurance company will a. Negotiate a reduced settlement with the beneficiary due to the unusual circumstances involved. b. Return the premium to Y's estate, since it has no obligation to pay the death claim. c. Keep the premium and reject the risk on the basis that the applicant died before the policy could be issued. d. Issue the policy anyway and pay the face value to the beneficiary.
c. When death occurs within a specified period of time after the policy was issued
When may an insurance company use suicide as a defense against paying a death claim? a. At any time suicide can be proven b. At no time c. When death occurs within a specified period of time after the policy was issued d. Only when there was a witness to the event
d. Equal to the original policy for as long as the cash values will purchase.
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. If it is intentional and material
When would a misrepresentation on the insurance application be considered fraud? a. Never: statements by the applicant are only representations. b. When the application is incomplete c. Any misrepresentation is considered fraud. d. If it is intentional and material
a. The employees receive individual policies.
Which of the following is INCORRECT concerning a noncontributory group plan? a. The employees receive individual policies. b. They help to reduce adverse selection against the insurer. c. They require 100% employee participation. d. The employer pays 100% of the premiums.
b. At the end of the 20 years, the policy's cash value will equal $100,000
Which of the following is INCORRECT regarding a $100,000 20-year level term policy? a. The policy will expire at the end of the 20-year period. b. At the end of 20 years, the policy's cash value will equal $100,000. c. The policy premiums will remain level for 20 years. d. If the insured dies before the policy expired, the beneficiary will receive $100,000.
a. They are required by state law to be included in the policy.
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 optional 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.
b. Standard
Which of the following is a risk classification used by underwriters for life insurance? a. Excellent b. Standard c. Poor d. Normal
a. Converting group coverage to individual coverage
Which of the following would NOT constitute a policy replacement? a. Converting group coverage to individual coverage b. Causing a lapse of an existing policy c. Changing a policy to reduced paid-up insurance d. Causing a reduction in the policy's benefit amount Converting coverage from group to individual is not considered a replacement.
c. Target premium
Which of the following would help prevent a universal life policy from lapsing? a. Adjustable premium b. Corridor of insurance c. Target premium d. Face amount
b. Insurable interest and consent
A life insurance policy has a legal purpose if both of which of the following elements exist? a. Policyowners and named beneficiaries b. Insurable interest and consent c. Underwriting and reciprocity d. Offer and counteroffer
a. 15 days of its delivery
A purchaser of life insurance policy has the right to return the policy for a full refund of the premium if done within a. 15 days of its delivery. b. 45 days of its delivery. c. 20 days of its issue. d. 30 days of its issue.
b. The insurer will pay the full death benefit from the group policy to the beneficiary.
An employee quits his job on May 15 and doesn't convert his Group Life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. Which of the following statements best describes what will happen? a. The insurer will pay nothing because the employee has terminated his group insurance and hasn't started the individual one. b. The insurer will pay the full death benefit from the group policy to the beneficiary. c. The insurer will pay a reduced death benefit to the beneficiary. d. The insurer will pay the death benefit minus one month's premium.
a. Common disaster
An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision? a. Common disaster b. Accidental death c. Survivor death d. Second-to-die
d. $3,000
An insured decides to surrender his $100,000 Whole Life policy. The premiums paid into the policy added up to $15,000. At policy surrender, the cash surrender value was $18,000. What part of the surrender value would be income taxable? a. $50,000 b. $18,000 c. $15,000 d. $3,000
d. 50 hours
As a condition of initial licensure, an individual applicant for a producer license in one line of authority will be required to complete approved prelicensing education of how many hours? a. 20 hours b. 32 hours c. 40 hours d. 50 hours
a. With the policy
If a policy. includes 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
b. Whether an insurable interest exists between the individuals.
If an applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about a. Which individual will pay the premium. b. Whether an insurable interest exists between the individuals. c. The gender of the applicant. d. The type of policy requested.
c. Issue an emergency cease and desist order.
If the Commissioner believes that an unauthorized person is engaging in the business of insurance in violation of the provisions of the Insurance Code, creating an immediate danger to the public safety, the Commissioner may a. Notify the National Association of Insurance Commissioners. b. Order an immediate hearing to be conducted. c. Issue an emergency cease and desist order. d. Publish a warning in an official newspaper circulated in Colorado.
d. Adhesion
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. set premium rates
The Ownership provision entitles the policyowner to do all of the following EXCEPT a. Receive a policy loan. b. Assign the policy. c. Designate a beneficiary. d. Set premium rates.
b. The insured's age at death.
The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPT a. Face amount of the policy. b. The insured's age at death. c. The beneficiary's life expectancy. d. Projected interest rates.
b. Taxable
The interest earned on policy dividends is a. 40% taxable, similar to a capital gain. b. Taxable. c. Nontaxable. d. Tax deductible.
c. An insured is diagnosed with cancer and needs help paying for her medical treatment.
Under which of the following circumstances would an insurer pay accelerated benefits? a. An insured is looking for a way to put her daughter through college. b. A couple wants to build a house and would like to make a larger down payment. c. An insured is diagnosed with cancer and needs help paying for her medical treatment. d. A couple is nearing retirement and needs a steady stream of income.
b. Cash values can be borrowed at any time.
What does "liquidity" refer to in a life insurance policy? a. The insured receives payments each month in retirement. b. Cash values can be borrowed at any time. c. The death benefit replaces the assets that would have accumulated if the insured had not died. d. The policyowner receives dividend checks each year.
b. Coverage ends and the policy cannot be reinstated
What happens when a policy is surrendered for its cash value? a. The policy can be converted to term coverage. b. Coverage ends and the policy cannot be reinstated. c. Coverage ends but the policy can be reinstated at any time. d. The policy can be reinstated by paying back all policy loans and premiums.
c. Proof of insurability is not required.
A couple owns a life insurance policy with a Children's Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability? a. Her parents' federal income tax receipts b. Medical exam and parents' medical history c. Proof of insurability is not required. d. Medical exam
a. Proof of insurability is not required.
A couple owns a life insurance policy with a Children's Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability? a. Proof of insurability is not required. b. Medical exam c. Her parents' federal income tax receipts d. Medical exam and parents' medical history
a. The insured's premiums will be waived until she is 21.
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's premiums will be waived until she is 21. b. The premiums will become tax deductible until the insured's 18th birthday. c. Since it is the policyowner, and not the insured, who has become disabled, the life insurance policy will not be affected. d. 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.
d. Immediate
A man purchased a $90,000 annuity with a single premium, and began receiving payments 2 months after that. What type of annuity is it? a. Flexible b. Deferred c. Variable d. Immediate
c. Annually, on or before March 1.
All insurance companies doing business in the state of Colorado must file a financial statement with the Commissioner a. Semiannually, January 1 and July 1 each year. b. Quarterly. c. Annually, on or before March 1. d. Annually, on or before January 1.
a. The individual has earned the designation from a for-profit organization.
All of the following are prohibited by individuals when using senior-specific designations EXCEPT a. The individual has earned the designation from a for-profit organization. b. The individual has not earned the designation. c. The designation is created by the individual. d. The designation is not in compliance with the standards of the organization conferring it.
b. The premiums are invested in the insurer's general account.
All of the following are true about variable products EXCEPT a. Policyowners bear the investment risk. b. The premiums are invested in the insurer's general account. c. The minimum death benefit is guaranteed. d. The cash value is not guaranteed.
c. This rider is available to all insureds with no additional premium.
All of the following are true regarding the guaranteed insurability rider EXCEPT a. The insured may purchase additional insurance up to the amount specified in the base policy b. It allows the insured to purchase additional amounts of insurance without proving insurability only at specified dates or events. c. This rider is available to all insureds with no additional premium. d. The insured may purchase additional coverage at the attained age.
b. Dividends from a mutual insurer.
All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT a. An offer to share in commissions generated by the sale. b. Dividends from a mutual insurer. c. An offer of employment. d. Stocks, securities, or bonds.
b. The employer can receive a current tax deduction for any contributions made to the plan.
All of the following statements concerning an employer sponsored nonqualified retirement plan are true EXCEPT a. The plan is not approved for favorable tax treatment by the IRS. b. The employer can receive a current tax deduction for any contributions made to the plan. c. The plan is a legal method of accumulating money for retirement needs. d. The plan can discriminate as to who may participate.
b. Dividend amounts are guaranteed in the policy.
All of the following statements concerning dividends are true EXCEPT a. Favorable investment results generate higher dividends. b. Dividend amounts are guaranteed in the policy. c. Lower insurance company costs generate higher dividends. d. They stem from favorable underwriting experience.
c. Equity Indexed Annuity
An annuity owner is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that will equal the performance of the Standard and Poor's 500 Index. She would likely purchase a(n) a. Flexible Annuity. b. Immediate Annuity. c. Equity Indexed Annuity. d. Variable Annuity.
d. Guaranteed insurability option
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. Dividend options b. Guaranteed renewable option c. Nonforfeiture options d. Guaranteed insurability option
b. Guaranteed insurability option
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. Adjustment in the amount of death benefit.
An insured misstates her age at the time the life insurance application is taken. This misstatement may result in a. Recession of the policy. b. Adjustment in the amount of death benefit. c. No change whatsoever. d. Automatic lapse.
a. The insured may renew the policy for another 10 years, but at a higher premium rate.
An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-year term? a. The insured may renew the policy for another 10 years, but at a higher premium rate. b. The insured must provide evidence of insurability to renew the policy. c. The insured may only convert the policy to another term policy. d. The insured may renew the policy for another 10 years at the same premium rate.
d. The insured may renew the policy for another 10 years, but at a higher premium rate.
An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-year term? a. The insured must provide evidence of insurability to renew the policy. b. The insured may only convert the policy to another term policy. c. The insured may renew the policy for another 10 years at the same premium rate. d. The insured may renew the policy for another 10 years, but at a higher premium rate.
c. Reinstatement Provision
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. Grace period b. Reinstatement provision c. waiver of premium provision d. incontestable clause
b. A full death benefit
If the owner of a whole life policy who is also the insured dies at age 80, and there are no outstanding loans on the policy, what portion of the death benefit will be paid to the beneficiary? a. The face amount minus the premiums that would have been collected until the insured reached the age of 100 b. A full death benefit c. A death benefit equal to the cash value of the policy d. 50% of the death benefit
d. An applicant submits an application to the insurer.
In insurance, an offer is usually made when a. The insurer approves the application and receives the initial premium. b. The agent hands the policy to the policyholder. c. An agent explains a policy to a potential applicant. d. An applicant submits an application to the insurer.
c. 5
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
b. Within 30 days, in writing
What is a requirement for notifying the Commissioner of any change of address? a. Within 15 days, in writing b. Within 30 days, in writing c. Within 10 days, by any means of communication d. Within 45 days, by any means of communication
b. The original age is used for premium determination.
What is the advantage of reinstating a policy instead of applying for a new one? a. The cash values have gained interest while the policy was lapsed. b. The original age is used for premium determination. c. Proof of insurability is not required. d. The face amount can be increased.
c. Viator
What is the name of the insured who enters into a viatical settlement? a. Contingent b. Viatical broker c. Viator d. Third party
b. They determine how death proceeds will be paid.
What is the purpose of settlement options? a. They provide the beneficiary with the income he/she cannot outlive. b. They determine how death proceeds will be paid. c. They are guarantees built into the policy. d. They guarantee a return of excess premiums.
b. The beneficiary must have insurable interest in the insured.
Which is NOT true about beneficiary designations? a. Trusts can be valid beneficiaries. b. The beneficiary must have insurable interest in the insured. c. The beneficiary may be a natural person. d. The policy does not have to have a beneficiary named in order to be valid.
c. Joint and survivor
Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary? a. Fixed-amount b. Life income with period certain c. Joint and survivor d. Single life
b. Reduced paid-up
Which nonforfeiture option provides coverage for the longest period of time? a. Accumulated at interest b. Reduced paid-up c. Extended term d. Paid-up option
b. Payor Benefit
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. Waiver of Premium b. Payor Benefit c. Jumping Juvenile d. Juvenile Premium Provision
d. The recommended amount to keep the policy in force throughout its lifetime
Which of the following best defines target premium in a universal life policy? a. The maximum amount the policyowner may pay on a policy b. The minimum amount to make sure the policy is annually renewable c. The corridor of insurance d. The recommended amount to keep the policy in force throughout its lifetime
c. It is level term insurance.
Which of the following best describes annually renewable term insurance? a. Neither the premium nor the death benefit is affected by the insured's age. b. It provides an annually increasing death benefit. c. It is level term insurance. d. It requires proof of insurability at each renewal.
c. The performance of the policy portfolio
Which of the following determines the cash value of a variable life policy? a. The policy's guarantees. b. The premium mode c. The performance of the policy portfolio d. The company's general account
c. It may last for the lifetime of the annuitant.
Which of the following is TRUE regarding the annuity period? a. It is also referred to as the accumulation period. b. It is the period of time during which the annuitant makes premium payments into the annuity. c. It may last for the lifetime of the annuitant. d. During this period of time the annuity payments grow interest tax deferred.
d. Register with FINRA and pass the Series 6 examination
Which of the following is a requirement for producers who want to start selling variable life insurance and annuities? a. Pass the Series 65 and 24 examinations b. No examination if registered with a broker dealer c. Register with NAIC and NASD d. Register with FINRA and pass the Series 6 examination
b. Application
Which of the following is the basic source of information used by the company in the risk selection process? a. Consumer report b. Application c. Agent's report d. Warranty
b. Variable universal life
Which of the following life insurance policies allows a policyowner to take out a loan from the policy's cash value? a. Decreasing term life b. Variable universal life c. Increasing term life d. Credit term life
b. A minor son of the insured
Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insureds' death? a. The former wife of the deceased insured b. A minor son of the insured c. A business partner of the insured d. The wife of the deceased insured
b. Straight Life
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
c. Long-term care
Which of the following riders added to a life insurance policy can pay part of the death benefit to the insured to cover expenses incurred in a nursing or convalescent home? a. Guaranteed insurability b. Payor benefit c. Long-term care d. Accidental death
b. Payor Benefit Rider
Which of the following riders would NOT cause the Death Benefit to increase? a. Accidental Death Rider b. Payor Benefit Rider c. Guaranteed Insurability Rider d. Cost of Living Rider
c. It will pay double or triple the face amount.
Which of the following statements is TRUE concerning the Accidental Death Rider? a. This rider is only available to insureds over the age of 65. b. It is only available in group insurance. c. It will pay double or triple the face amount. d. It is also known as a triple indemnity rider.
a. Variable plan
Which of the following terms will be permissible in describing a life insurance policy in company advertisements? a. Variable plan b. Risk-free plan c. Investment plan d. Retirement plan
d. Premium amounts and surrender values
Which of the following will be included in a policy summary? a. Copies of illustrations and application b. Comparisons with similar policies c. Primary and secondary beneficiary designations d. Premium amounts and surrender values
a. Agent C uses her license to write only business other than controlled.
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.
d. Target premium
Which of the following would help prevent a universal life policy from lapsing? a. Face amount b. Adjustable premium c. Corridor of insurance d. Target premium
d. Term rider
Which of the following, when attached to a permanent life insurance policy, allows the policyowner to customize the policy to provide an additional amount of temporary insurance on the insured, or allows amounts of temporary insurance to cover other family members? a. Accidental death and dismemberment rider b. Guaranteed insurability rider c. Change of insured rider d. Term rider
d. Insuring clause
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. Entire contract clause b. Beneficiary clause c. Consideration clause d. Insuring clause
a. Its premium steadily decreases over time, in response to its growing cash value.
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. The insurance company
Who bears all of the investment risk in a fixed annuity? a. The insurance company b. The owner c. The beneficiary d. The annuitant