Missed Questions SC LIFE INSURANCE

All of the following entities regulate variable life policies EXCEPT a)The Guaranty Association. b)Federal government. c)The SEC. d)The Insurance Department.

A

If the Director determines that an insurance producer is ineligible for appointment, how many days do they have to notify the insurer? a)5 days b)10 days c)15 days d)20 days

A

Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die? a)Joint Life b)Decreasing Term c)Whole Life d)Ordinary Life

A

What is the purpose of a suicide provision within a life insurance policy? a)To protect the insurer from persons who purchase life insurance with the intention of committing suicide b)To limit the insurer's liability after the 2 year waiting period c)To deter the policyowner from committing suicide d)To protect the policyowner

A

An Adjustable Life policyowner can change which of the following policy features? a)The coverage period b)The mortality expense c)The investment account d)The insured

A:Typically, the owner of an adjustable life policy has the following privileges; increasing or decreasing the premium; changing the premium-paying period; increasing or decreasing the face amount of coverage; or changing the period of protection.

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

B

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

B

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

B

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)Personal b)Adhesion c)Unilateral d)Conditional

B

A producer licensed in Life and Health, as well as Property and Casualty, must complete a minimum of how many hours in each line of authority every 2 years? a)16 b)8 c)12 d)24

B:A minimum of 8 hours of instruction must be obtained in each line if you are a multiple line agent.

A person who does not lock the doors or does not repair leaks shows an indifferent attitude. This person presents what type of hazard? a)Physical b)Morale c)Moral d)Legal

B:A morale hazard is someone who has an indifferent attitude towards an insurance company. He is careless or irresponsible because he knows his loss will be covered by insurance.

All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT a)Stocks, securities, or bonds. b)An offer to share in commissions generated by the sale. c)Dividends from a mutual insurer. d)An offer of employment.

C

An insurer that holds a Certificate of Authority in the state in which it transacts business is considered a/an a)Certified insurer. b)Self-insurer. c)Authorized insurer. d)Local insurer.

C

Life income joint and survivor settlement option guarantees a)Payout of the entire death benefit. b)Equal payments to all recipients. c)Income for 2 or more recipients until they die. d)Payment of interest on death proceeds.

C

Which of the following is NOT true regarding the annuitant? a)The annuitant receives the annuity benefits. b)The annuitant must be a natural person. c)The annuitant cannot be the same person as the annuity owner. d)The annuitant's life expectancy is taken into consideration for the annuity.

C

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.

C

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

D

What is the tax consequence of amounts received from a Traditional IRA after the money was left in the tax-deferred account by the beneficiary? a)Income tax on distributions plus 10% penalty. b)Capital gains tax on distributions and no penalty. c)Capital gains tax on distributions plus 10% penalty. d)Income tax on distributions and no penalty.

D

Which of the following is TRUE about credit life insurance? a)Debtor is the annuitant. b)Creditor is the insured. c)Debtor is the policy beneficiary. d)Creditor is the policyowner.

D

Which of the following best describes annually renewable term insurance? a)It is level term insurance. b)It requires proof of insurability at each renewal. c)Neither the premium nor the death benefit is affected by the insured's age. d)It provides an annually increasing death benefit.

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

All of the following statements about equity index annuities are correct EXCEPT a)The annuitant receives a fixed amount of return. b)They have a guaranteed minimum interest rate. c)The interest rate is tied to an index such as the Standard & Poor's 500. d)They invest on a more aggressive basis aiming for higher returns.

A:Equity indexed annuities have a guaranteed minimum interest rate, so while they are aggressive in nature, the annuitant will not have to worry about receiving less than what the minimum interest rate would yield.

Which of the following best describes the MIB? a)It is a rating organization for health insurance. b)It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance. c)It is a government agency that collects medical information on the insured from the insurance companies. d)It is a member organization that protects insured against insolvent insurers.

B

When must insurable interest exist in a life insurance policy? a)At the time of loss b)At the time of application c)At the time of policy delivery d)When there is a change of the beneficiary

B:In life insurance, insurable interest must exist at the time of application.

All of the following are true of the Insurance Fraud Act EXCEPT a)Requires reports of insurance fraud to be available for public inspection. b)Requires investigation of alleged fraud by the State Law Enforcement Division. c)Established the Insurance Fraud Division in the office of the Attorney General. d)Set penalties for fraud and requires full restitution for fraud.

A:Any information furnished concerning fraud is privileged and cannot be part of any public record.

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)100% participation of members is required in noncontributory plans. b)Each member covered receives a policy. c)Coverage cannot be converted when an individual leaves the group. d)Premiums are determined by age, occupation, and individual underwriting.

A:If the employer pays all of the premium, then all employees must be included. If the employer pays all of the premium, then all employees must be included.

Peril is most easily defined as a)The cause of loss insured against. b)An unhealthy attitude about safety. c)The chance of a loss occurring. d)Something that increases the chance of loss.

A:Perils are the causes of loss insured against in an insurance policy

All of the following are requirements for a nonresident license EXCEPT a)Holding an active license in the same line of authority in the home state. b)Passing this state's licensing examination. c)Submitting a proper application and paying the fees. d)Submitting a licensing application from the home state.

B

All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT a)The insurer determines the amount for each payment. b)It is a life contingency option. c)It will pay the benefit only for a designated period of time. d)The payments are not guaranteed for life.

B

The clause that protects the proceeds of a life insurance policy from creditors after the death of the insured is known as the a)Beneficiary protection clause. b)Spendthrift clause. c)Benefit protection clause. d)Incontestability clause.

B

What is a definition of a unilateral contract? a)If one party makes a condition, the other party can counteroffer. b)One-sided: only one party makes an enforceable promise. c)Two or more parties go into a contract understanding there may be an unequal exchange of value. d)One author: the company wrote the contract; the insured must accept it as written.

B

When is the earliest a policy may go into effect? a)After the underwriter reviews the policy b)When the application is signed and a check is given to the agent c)When the first premium is paid and the policy has been delivered d)When the insurer approves the application

B

The Director must give a written notice of the time and place for the hearing to the person cited to appear within how many days? a)20 b)30 c)10 d)15

B:A notice of 30 days before a hearing date is required.

Which of the following riders would NOT cause the Death Benefit to increase? a)Cost of Living Rider b)Accidental Death Rider c)Payor Benefit Rider d)Guaranteed Insurability Rider

C

Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract? a)Concealment b)Indemnity c)Representation d)Warranty

D: 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.

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)Jumping Juvenile b)Juvenile Premium Provision c)Waiver of Premium d)Payor Benefit

D: 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 option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early? a)Dividend Accumulation option b)Paid-up option c)Accumulation at Interest d)Paid-up additions

B:With the paid-up option, the insurer can accumulate dividends at interest and then use them, in addition to interest and the policy's cash value, to pay the policy earlier than planned. This is different from paid-up additions, in which the dividends are used to buy additional policies that increase the face amount of the original policy.

All of the following are true regarding a decreasing term policy EXCEPT a)The contract pays only in the event of death during the term and there is no cash value. b)The face amount steadily declines throughout the duration of the contract. c)The payable premium amount steadily declines throughout the duration of the contract. d)The death benefit is $0 at the end of the policy term.

C

Which of the following is TRUE regarding variable annuities? a)The company guarantees a minimum interest rate. b)A person selling variable annuities is required to have only a life agent's license. c)The annuitant assumes the risks on investment. d)The funds are invested in the company's general account

C

Which of the following is an example of a producer's fiduciary duty? a)A duty to base all transactions upon the principle of Utmost Good Faith. b)The obligation to tell the truth to the best of one's knowledge c)The trust that a client places in the producer in regard to handling premiums. d)An obligation to state every known fact about the policy the producer is selling.

C: An agent acts in a fiduciary capacity, based upon trust and confidence, when handling the financial affairs of their customers, including the handling of premiums.

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: Coverage commences on the date of the application or the date of a medical examination, whichever is later, on the condition that the applicant is determined to be insurable at the rate applied for.

Which two terms are associated directly with the way an annuity is funded? a)Immediate or deferred b)Renewable or convertible c)Single payment or periodic payments d)Increasing or decreasing

C:Annuities are characterized by how they can be paid for: either a single payment (lump sum) or through periodic 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.

Which of the following is NOT typically excluded from life policies? a)Death that occurs while a person is committing a felony b)Death due to war or military service c)Death due to plane crash for a fare-paying passenger d)Self-inflicted death

C:Generally, policies do not exclude conditions in which an insured is a fare-paying passenger on a commercial airline.

When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy? a)It decreases over the term of the policy. b)It remains the same as the original policy, regardless of any differences in value. c)It is reduced to the amount of what the cash value would buy as a single premium. d)It is increased when extra premiums are paid.

C:In a reduced paid-up policy, the original policy's cash value is used as single premium to pay for a permanent policy with a reduced face amount from the original, hence the name. The new policy accumulates in cash value until its maturity or the insured's death.

An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1; however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy? a)$0 b)$200 c)$9,800 d)$10,000

C:In this scenario, the death occurred within the mandatory 30-day grace period. Past due premium would be subtracted from the face amount of the policy.

Which of the following provisions in annuity contracts allow the owner to surrender the annuity if interest rates drop to a specified level? a)Nonforfeiture b)Annuitization c)Bail-out d)Surrender

C:Some annuity contracts contain a bail-out provision. This provision allows the owner to surrender the annuity without charge if interest rates drop a specified amount within a certain timeframe.

Another name for a substandard risk classification is a)Declined. b)Elevated. c)Rated. d)Controlled.

C: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.

Which of the following best describes fixed-period settlement option? a)The death benefit must be paid out in a lump sum within a certain time period. b)Income is guaranteed for the life of the beneficiary. c)Both the principal and interest will be liquidated over a selected period of time. d)Only the principal amount will be paid out within a specified period of time.

C:Under the fixed-period option (also called period certain), a specified period of years is selected, and equal installments are paid to the recipient. Both the principal and interest are liquidated together over the selected period of time.

When a life insurance policy stipulates that the beneficiary will receive payments in specified installments or for a specified number of years, what provision prevents the beneficiary from changing or borrowing from the planned installments? a)Accelerated benefit provision b)Loan provision c)Spendthrift provision d)Settlement option

C:When a life insurance policy contains a spendthrift provision, all rights of the beneficiary to change time of payment or amount of installments, surrender for cash, borrow against, or assign for any purpose, are withdrawn and those parts of the policy that may give the beneficiary such rights are declared inoperative and void.

An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries? a)The beneficiary will receive 2/3 of the total benefit, with the final 1/3 payable when the first beneficiary dies. b)One of the beneficiaries will receive 1/3 and the other 2/3 of the proceeds when the insured dies. c)The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive. d)The beneficiary will receive 2/3 of the lump sum up front, and the remaining 1/3 will be paid over time.

C:When the reduced option is written as "joint and 2/3 survivor," the surviving beneficiary receives 2/3 of what was received when both beneficiaries were alive

Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client? a)Interest-sensitive whole life b)Life annuity with period certain c)Increasing term d)Limited pay whole life

D:Premium payments will cease at her age 65, but coverage will continue to her death or age 100.

The Waiver of Cost of Insurance rider is found in what type of insurance? a)Whole Life b)Joint and Survivor c)Juvenile Life d)Universal Life

D:The Waiver of Cost of Insurance rider is found in Universal Life policies. If the insured becomes disabled, the rider allows the cost of insurance to be waived, with the exception of premium costs required to accumulate cash value.

In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT a)The length of coverage. b)The premium. c)The amount of insurance. d)The type of investment.

D:Typically, the owner of an adjustable life policy has the following privileges: increasing or decreasing the premium, changing the premium-paying period, increasing or decreasing the face amount of coverage, or changing the period of protection.

When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to a)Purchase a term rider to attach to the policy .b)Pay back all premiums owed plus interest. c)Receive payments for a fixed amount. d)Purchase a single premium policy for a reduced face amount.

D:When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used by the insurer as a single premium to purchase a completely paid up permanent policy that has a reduced face amount from that of the former policy.