Life Insurance Study
Which of the following is NOT true regarding the accumulation period of an annuity?
It would not occur in deferred annuity
Which of the following best describes the MIB?
It's a nonprofit organization that maintains underwriting information on applicants for life and health insurance
What required provision protects against unintentional lapse of the policy?
grace period
Rules of replacement apply to all of the following EXCEPT:
group life insurance
At the time the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability. This rider is called:
guaranteed insurability
If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a:
guaranteed insurability rider
The policy owner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policy owner choose?
interest only option
Which of the following is NOT true regarding a Certificate of Authority?
it is issued to group insurance participants
An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy?
mutual
Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured?
option B
A rider attached to a life insurance policy that provides coverage on the insured's family members is called the:
other-insured rider
What is the major difference between a stock company and a mutual company?
ownership
An agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. The agent is guilty of:
rebating
A domestic insurer issuing variable contracts must establish one or more:
separate accounts
Children's riders attached to whole life policies are usually issued as what type of insurance?
term
Which of the following policies would NOT have a policy loans provision?
term life
Which of the following would qualify as a competent party in an insurance contract?
the applicant has a prior felony conviction
Who bears all of the investment risk in a fixed annuity?
the insurance company
Insurance companies may be classified according to the legal form of their ownership. The type of company organized to return any surplus money to their policyholders is:
a mutual insurer
All of the following are personal uses of life insurance EXCEPT:
buy-sell agreement
Which of the following is a generic consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process?
buyer's guide
The term "illustration" in a life insurance policy refers to:
A presentation of non-guaranteed elements of a policy
The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the:
one-year term option
A candidate for Life insurance producer's license must complete how many hours of prelicensing education?
20
Candidates for either a Property license or a Casualty license must complete how many hours of prelicensing education?
20
As a condition for renewal of their licenses, how many hours of continuing education are required for all resident and nonresident insurance producers?
24
An insurer must present a Buyer's Guide and Policy Summary prior to accepting the applicant's initial premium, unless the policy contains an unconditional refund provision lasting at least how many days?
10
Within how many days must insurance producers reports changes of address to the Commissioner?
30 days
Who is the owner and who is the beneficiary on a Key Person Life Insurance policy?
the employer is the owner and the beneficiary
Which of the following statements is NOT true concerning insurable interest as it applies to life insurance?
A debtor has an insurable interest in the life of a lender
All of the following are dividend options EXCEPT:
Fixed period installments
A father purchases a life insurance policy on his teenage daughter and adds the Payor Benefit rider. In which of the following scenarios will the rider waive the payment of premium?
If the father is disabled for more than 6 months
Who makes up the Medical Information Bureau?
Insurers
In any controversy between the insured or the insured's beneficiary and the insurer that arises from the application for insurance or any policy issued in connection with the application, the producer is considered to be the agent of which of the following?
The insurer
which is true about a spouse term rider?
The rider is usually level term insurance
Which of the following is NOT true of life settlements?
The seller must be terminally ill
What is the purpose of settlement options?
They determine how death proceeds will be paid
Which of the following is the closest term to an authorized insurer?
admitted
What does "level" refer to in level term insurance?
face amount
An applicant is denied insurance because of information found on a consumer report. Which of the following requires that the insurance company supply the applicant with the name and address of the consumer reporting company?
fair credit reporting act
Which two terms are associated directly with the premium?
level or flexible
An insured purchased a life policy in 2010 and died in 2017. The insurance company discovers at that time that the insured had concealed information during the application process. What can they do?
pay the death benefit
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?
viatical settlement
The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive?
$100,000
An employee quits her job where she has a balance of $10,000 in her qualified plan. The balance was paid out directly to the employee in order for her to move the funds to a new account. If she decides to rollover her plan to a Traditional IRA, how much will she receive from the plan administrator and how long does she have to complete the tax-free rollover?
$8,000, 60 days
The insured is also the policy owner of a whole life policy. What age must the insured attain in order to receive the policy's face amount?
100
How many credit hours of excess continuing education are producers allowed to carry over to the next renewal cycle?
12 hours
A temporary license may be issued by the Commissioner for a period not to exceed how many days?
180 days
How soon must the insurer pay a death benefit claim after receiving the proof of death?
2 months
Which of the following would be required to complete prelicensing education?
A nonresident life insurance producer who is planning to transact property insurance
An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe?
Aleatory
All of the following are examples of third-party ownership of a life insurance policy EXCEPT
An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan
All of the following are requirements to be licensed as an insurance producer in Tennessee EXCEPT:
Be at least 21 years of age
Which of the following statements concerning buy-sell agreements is true?
Buy-sell agreements are normally funded with a life insurance policy
If a producer continues to violate the Insurance Code, a new civil penalty will be assessed every:
day
When an employee terminates coverage under a group insurance policy, coverage continues in force:
for 31 days
Which of the following are not fundable by annuities?
Death benefits
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?
Decreasing Term
If a producer discusses policy dividends in a sales presentation, what statement must the producer also make?
Dividends are not guaranteed
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)
Equity Indexed Annuity
If a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT:
Erase the incorrect answer and record the correct answer
An insured purchased a Life Insurance policy. The agent told him that depending upon the company's investments and expense factors, the cash values could change from those shown in the policy at issue time. The policy is a/an:
Interest-sensitive whole life
What is the benefit of choosing extended term as a nonforfeiture option?
It has the highest amount of insurance protection
Which of the following is TRUE regarding the annuity period?
It may last for the lifetime of the annuitant
Which of the following settlement options in life insurance is known as straight life?
Life income
For the purpose of making an investigation, the Commissioner does NOT have the power to do which of the following?
Make testimony and documents available to the public
On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are:
Not taxable since the IRS treats them as a return of a portion of the premium paid
During replacement of life insurance, a replacing insurer must do which of the following?
Obtain a list of all life insurance policies that will be replaced
Which of the following is NOT true regarding the annuitant?
The annuitant cannot be the same person as the annuity owner
All of the following statements about equity index annuities are correct EXCEPT:
The annuitant receives a fixed amount of return
Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean?
The beneficiary will only receive payments of the interest earned on the death benefit
If an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE?
The policy will be interpreted as if the insurer waived its right to have an answer on the application
All of the following are true about variable products EXCEPT:
The premiums are invested in the insurer's general account
All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT:
Upon conversion, the death benefit of the permanent policy will be reduced by 50%
When is the earliest a policy may go into effect?
When the application is signed and a check is given to the agent
A Straight Life policy has what type of premium?
a level annual premium for the life of the insured
What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident?
common disaster clause
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?
consideration
According to the entire contract provision, what document must be made part of the insurance policy?
copy of the original application
The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called:
waiver of premium
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?
100% participation of members is required in noncontributory plans
The equity in an equity index annuity is linked to:
An index like Standard & Poor's 500
Under which of the following circumstances would an insurer pay accelerated benefits?
An insured is diagnosed with cancer and needs help paying for her medical treatment
In an annuity, the accumulated money is converted into a stream of income during which time period?
Annuitization period
A Limited Insurance Representative is an individual, other than an insurance producer, who may solicit or negotiate contracts for certain types of insurance which includes all of the following EXCEPT:
Automobile physical damage insurance
When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount?
Equal to the original policy for as long as the cash values will purchase
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?
Guaranteed insurability option
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:
Issue the policy anyway and pay the face value to the beneficiary
What is the purpose of a conditional receipt?
It is intended to provide coverage on a date earlier than the date of the issuance of the policy
Which of the following best describes annually renewable term insurance?
It is level term insurance
Which of the following is true of a children's rider added to an insured's permanent life insurance policy?
It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age
Which of the following is true about the premium on the children's rider in a life insurance policy?
It remains the same no matter how many children are added to the policy
Which of the following best describes the unfair trade practice of defamation?
Making derogatory oral statements about another insurer's financial condition
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?
Proof of insurability is not required
If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back?
The balance of the loan will be taken out of the death benefit
An applicant signs an application for a $25,000 life insurance policy, pays the initial premium, and receives a conditional receipt. If the applicant dies the following day, which of the following is TRUE?
The beneficiary will receive the full death benefit if it is determined that the applicant qualified for the policy
The policy owner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?
The death benefit can be increased by providing evidence of insurability
Why should the producer personally deliver the policy when the first premium has already been paid?
To help the insured understand all aspects of the contract
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 full death benefit
An insured misstates her age at the time the life insurance application is taken. This misstatement may result in:
adjustment in the amount of death benefit
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?
aleatory
If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information EXCEPT the applicant's
ancestry
All other factors being equal, the least expensive first-year premium payment is found in:
annually renewable term
What does "liquidity" refer to in a life insurance policy?
cash values can be borrowed at any time
A banker is ready to close on a customer's loan. The bank is prepared to offer the loan but only if the customer purchases a life insurance policy from the bank in the amount of the loan. This is an example of:
coercion
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?
conditional
A key person insurance policy can pay for which of the following?
costs of training a replacement
When doing business in this state, an insurance company that is formed under the laws of another state is known as which type of insurer?
foreign
If a life policy allows the policy owner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a:
guaranteed insurability rider
An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice?
illegal
Which of the following would be considered false advertising?
implying that the agent is the insurer
Annually renewable term policies provide a level death benefit for a premium that
increases annually
A life insurance policy has a legal purpose if both of which of the following elements exist?
insurable interest and consent
Which of the following is an example of a limited-pay life policy?
life-paid up at age 65
An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it?
limited-pay life
All other factors being equal, what would the premium be like in a survivorship life policy as compared to the premium in a joint life policy?
lower
Which of the following riders would NOT cause the Death Benefit to increase?
payor benefit rider
What describes the specific information about a policy?
policy summary
If the policyowner, the insured, and the beneficiary under a life insurance policy are three different people, who has the ownership rights?
policyowner
Most agents try to collect the initial premium for submission with the application. When an agent collects the initial premium from the applicant, the agent should issue the applicant a:
premium receipt
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?
reinstatement provision
Which of the following is called a "second-to-die" policy?
survivorship life
The premiums paid by the employer in a business life insurance policy are:
tax deductible by the employer
In a case where the primary beneficiary predeceases the insured, in the event of the insured's death, the death benefit proceeds will be paid to:
the contingent beneficiary
A 40-year old man buys a whole life policy and names his wife as his only beneficiary. His wife dies 10 years later. He never remarries and dies at age 61, leaving 2 grown-up children. Assuming he never changed the beneficiary, the policy proceeds will go to:
the insured's estate
Who can request changes in premium payments, face value, loans, and policy plans?
the policy owner
Which of the following statements is correct regarding a whole life policy?
the policy owner is entitled to policy loans
Which of the following is TRUE regarding the premium in term policies?
the premium is level
The regulation of the insurance industry primarily rests with:
the state
Which of the following is TRUE about nonforfeiture values?
they are required by state law to be included in the policy
All of the following are requirements for life insurance illustrations EXCEPT:
they must be part of the contract
Which type of life insurance policy allows the policy owner to pay more or less than the planned premium?
universal life
What is the name of the insured who enters into a viatical settlement?
viator
Which of the following types of insurance policies would perform the function of cash accumulation?
whole life
If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant
with 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:
with the policy
