Life state
What item binds the insured to coverage as of the date of the application or medical examination provided that the proposed insured is determined to be an acceptable risk
A conditional receipt
An application for a life insurance policy that is submitted with the initial premium is legally considered to be
A consideration
On January 3, an insured accepts delivery of a whole life policy that has an effective date of December 22. If the insured becomes disabled on January 6 as the result of an accident, and the disability continues beyond July 6, the insurance company will
Continue the coverage and reimburse the insured for wage loss incurred during the period of disability
What is a feature of a group term life policy that enables individuals to leave the group and continue his or her insurance without providing evidence of insurability?
Conversion privilege
When does coverage in a life insurance policy
Coverage can never begin unless the premium has been paid and the applicant has satisfied all of the conditions of the conditional receipt
If an insured commits suicide when a suicide clause is in effect, an insurance company will take what actions with a beneficiary's claim?
Deny the claim and return the premium
USA Patriot Act
Designed to detect international money laundering and the financing of terrorism
Which of the following sections of a life insurance contract states that the application is part of the contract
Entire contract provision
Failure to repay loan will have an affect on what
Failure to repay loan will have a permanent effect on cash value accumulation
Life Income Annuity (Straight or Pure Life Annuity)
Has no beneficiaries and is the most risky option
Are IRA contributions deductible?
IRA contributions may be tax deductible if income is below a certain amount
An insurance company accepts an application containing several unanswered questions and issues the policy, in this situation the company
Must honor the policy as issued
Is a stock company participating or nonparticipating
Nonparticipating meaning they don't participate in being paid dividends
Dividends received by the owner of the mutual policy are
Not taxable
R's life insurance policy lapsed because R did not pay the premium after 60 days in order to put the policy back in force. What actions should R take?
Complete an application for reinstatement and summit all back premiums due
Under the internal revenue code, a portion of the employer paid premiums of group term life insurance is taxable for an employee whose coverage exceeds what minimum amount
$50,000
A policy that is overfunded, according to IRS tables, is classified as which of the following types of policies?
Modified Endowment Contract
What is a cash value
-A savings element of whole life policies that are payable before death -Value during early years typically will be less than the premiums paid
A 30 year old prospective insured is considering the purchase of a life insurance policy. If all of the following policies have the same face amount, what is required the largest annual premium
20 pay life
An insured, age 30, wants to purchase a whole life policy that will accumulate cash value at a faster rate in the early years of the policy. What is the best response the producer should make
20 year pay life will accumulate cash value faster
J, a 30 year old proposed insured, plans to retire at age 60 and wants to purchase life insurance that offers level premiums and life long protection. If J also wants the policy to be paid up when J retires, J should buy
30 pay life insurance
Tradition IRA withdrawals are generally subject to a tax penalty if they are made before the insured reaches what minimum age
59.5
Extended Term Policy
A nonforfeiture option under a life insurance policy that allows you to use the cash value to purchase a term policy
What annuity has the least amount of risk
A refund annuity
What contract is purchased with a lump sum and pays a guaranteed income
A single premium annuity
Survivorship Life Policy
Commonly used in estate planning so the death benefit of the policy can be used to pay estate taxes when due
What is a policy guaranteed to be CORRECT
A warranty
Which of the following provisions could double face amount of insurance if an insureds death occurred as the result of an unintended and unforeseen event
Accidental death and dismemberment (AD&D) provision
Guaranteed insurability rider
Allows insured to purchase additional amounts of disability income insurance at future dates
Long term care riders
Allows the insured to take out money out of a policy's cash value to pay for qualifying nursing home care or home health care expenses
Viatical Settlements
An agreement where a terminally ill insured sells their policy to an investor for less than its amount face values
What feature of a life policy is used to restrict coverage
An endorsement
If a forty five year old individual bought an annuity to provide income for life beginning at age 65, the insured did NOT buy
An immediate annuity
Variable Life Insurance
An insurance and securities product that provides a hedge against inflation
What is the sole collateral for a policy loan
An insured's policy is the sole collateral for a policy loan
A beneficiary who must consent to a change in the beneficiary designation in a life insurance policy is referred to as
An irrevocable beneficiary
The premium mode that results in the lowest premium outlay is
Annually
Is an insured purchases an annuity from which income is received, the insured is the
Annuitant
If an applicant whose income tends to fluctuate, what insurance policy should they get
Applicants whose income tends to fluctuate may benefit most from purchasing an adjustable whole life policy
What policy features permits an insured to pay premiums MORE than once every year
Mode of premium provision
Third party ownership
Includes key person and partnership insurance, as well as policy written on the life of a spouse or minor
What is not an action an adjustable life policy owner may take without providing proof of insurability
Increase the face amount
One of the basic concepts of insurance underwriter is that a life insurance policy owner must be the insured, a blood relative, or someone who would suffer an economic loss if the insured died. This is known as
Insurable interest
Variable whole life insurance is a
Insurance and a securities product
What best describes a policy loan against a life insurance contract
Interest rates on a loan are determined by the insurance companys loss ratio experience
What is a Settlement option provision in a life insurance policy
It describes various methods of distributing death benefits to beneficiaries
Universal life insurance policy
It is a Flexible Premium Adjustable Life policy where the policy owner has a choice of death benefits. The policy owner may also skip, reduce or increase their premiums and policies will not lapse as long as there is enough cash value to cover expenses deductions
Stranger-Originated Life Insurance (STOLI)
Life insurance arrangement in which a person with no relationship to the insured purchases a life policy on the insured's life with the intent of selling the policy to an investor and profiting financially when the insured dies
An accelerated death benefit of a life insurance policy is also known as
Living benefit
On May 8th a prospect filled out an application for a life insurance policy but paid no premium. The insurance company approved the application on May 14th and issued the policy on May 15th. The producer delivered the policy on May 26th and collected the first premium. The coverage became effective on:
May 26th
A client should know that the indexed annuity differs from the fixed annuity in the indexed annuity
May receive credited interest based on the fluctuations of the linked index
Are mutual insurance companies participating or non participating
Participating meaning they do participate in being paid dividends
M understates her age in an application for a policy. At M's death the company will most likely
Pay an amount based on what M's premium payments would have been if M had given her true age
An insured must take which of the following actions to continue a renewable term policy
Pay the renewal premium
What provision of a life insurance policy will pay a stated amount to an insured
Payor clause
In a life insurance contract, the consideration given by the applicant in exchange for the promises of the insurance company consists of the insureds statement in the application and what else?
Permission for the company to check the insureds credit
Can policy loans be taken during the grace period
Policy loans may be taken during the grace period
Are premiums for whole life policies higher or lower than term insurance
Premiums for whole life policies are higher than term life insurance
What is limited pay whole life
Premiums paid for limited period with higher premium to build cash value sooner. Premiums for the coverage will be completely paid up before age 100
Dividends paid on a life insurance policy are
Projected but not guaranteed
The primary purpose of including a suicide provision in a life insurance policy is to
Protect the insurer against the purchase of a policy in contemplation of suicide
A guaranteed insurability provision is best described as
Provision that allows insurance to be issued on children of the insured
What is not an example of nonforfeiture options
Renewability
An agent receives an unsolicited call from a prospective client who wants to purchase a large single premium life policy. When advised about an early withdrawal penalties, the client does not seem concerned and is evasive when the agent inquires about the source of the funds. In this situation the agent should
Request a cashiers check for submission to the insurance company with an application
An insurer's underwriter uses medical information obtained on an application to determine
Risk classification
An annuity that allows an individual to choose the annual premium payment amount is
Single premium
The accelerated death benefit in a life insurance contract can be accessed by
Submitting for access 75% of the contracts death benefit upon diagnosis of a cancerous tumor
Which of the following policies insures two individual and is designed to pay a benefit at the second death
Survivorship life
Interest from unpaid death benefits for the beneficiaries are
Taxable
Dividends received by the owner of stock companies are
Taxable as ordinary income
Does a beneficiary have to be age of the majority
The beneficiary DOES NOT have to be the age of majority in order to receive proceeds; however proceeds cannot be directly paid to a minor since they cannot sign the release
In a increasing and decreasing term policy, are the death benefits changing or the premiums
The death benefits changes each year. The premium stays level (the same)
What does an employer provides in a noncontributory group term life insurance
The employer pays for the entire cost of the plan
What variable changes in a decreasing term policy
The face amount decreases on a decreasing term policy, not the premiums
A joint life policy pays only when
The first insured dies
When does the free look period start
The free look period starts upon policy delivery. If the policy is mailed to the policy owner by the company, free look starts on the date of mailing (known as constructive delivery)
Under a unilateral life insurance policy, what party makes the legally enforceable promise
The insurance company
In an insuring clause, the insurance company is making a promise to pay what to the insurer
The insurance company is making a promise to pay the death benefit
What is a feature typical of term insurance
The policy expires at the end of the policy period
Who has the right to change the beneficiary designation on a life insurance policy
The policy owner
In a Whole life policy
The policy owner may borrow against the cash value of the policy
What variable changes in an annual renewable level term policy
The premiums in a renewable level term policy will increase every year but the face amount will remain the same
Who is responsible for explaining the policy provisions, riders, and exclusions to the policy owner and/or insured?
The producer has the responsibility to explain the policy provisions, riders, and exclusions to the policy owner and/or insured
In a third party ownership arrangement which of the following individual is a party to the contract
The revocable beneficiary
A joint and survivor life policy only pays when
The second insured dies
If an insured dies during a contestable period of life insurance policy, the insurance company will NOT pay the policy proceed in what situation
There was a material misrepresentation in the application
Why is an applicants signature required on a life insurance application
To represent that the statements on the application are true to the best of the applicants knowledge
What type of policies offers the owner investment in money making funds, long term bonds, or equities
Variable life
S and W are business partners. Each takes out a $100,000 life insurance policy on the other, naming himself as primary beneficiary. S and W eventually dissolve their business, and two months later S dies. Although S was married at the time of death, the primary beneficiary is still W. However, an insurable interest no longer exists. The proceeds from S's life insurance policy will go to
W
An applicant for life insurance must be informed of their rights under the fair credit reporting act at which of the following times
When the producer completes the insureds application
Dividends
earnings distributed to stockholders (a participating insurance company)
HIPAA (Health Insurance Portability and Accountability Act)
federal law that protects the privacy of personal health information
Key person life insurance
life insurance that protects a firm against losses due to the death of a key employee. The business is the policy owner, pays the premium, and is the beneficiary in a key person life insurance
Premiums paid for individual life insurance are
not tax deductible however the proceeds are not taxable
Cost of living rider
provides increases in the amount of insurance protection without requiring the insured to provide evidence of insurability and is designed to keep up with inflation
Any amount used for approved long term care expenses
reduces the policy's death benefit
Death benefits paid to beneficiaries are
tax free on all life insurance
On cash surrender, amounts paid in excess of premiums paid are
taxable
Waiver of premium rider
waives the premium for the policy if the insured becomes totally disabled
