New Jersey Life

An agent selling variable annuities must be registered with 1. The Guaranty Association 2. Department of Insurance 3. FINRA 4. SEC

FINRA (Financial Industry Regulatory Authority) Because variable annuities are considered to be securities, a person must be registered with the FINRA and hold a securities license in addition to a life agent's license in order to sell variable annuities.

A producer's appointment lasts for how long? 1. 5 years 2. 3 years 3. Until it is terminated 4. 2 years

Until it is terminated While the producer is licensed, any agency appointment continues in effect until termination.

All of the following benefits are available under Social Security EXCEPT 1. Welfare benefits 2. Disability benefits 3. Old-age and retirement benefits 4. Death benefits

Welfare benefits Social Security is an entitlement program, not a welfare program.

Which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy? 1. Owner's Rights 2. The Consideration Clause 3. Assignment Rights 4. The Entire Contract Provision

Owner's Rights Policyowners can learn about their ownership rights by referring to the policy.

Which of the following policies would be classified as a traditional level premium contract? 1. Adjustable Life 2. Universal Life 3. Straight Life 4. Variable Universal Life

Straight Universal Life Straight whole life policies have a level guaranteed face amount and a level premium for the life of the insured.

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? 1. $50,000 2. $60,000 3. $40,000 4. $10,000

$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 benefit amount.

By how many days does the discontinuance of a group insurance policy reduce the time limit for providing notice of claim or proof of loss? 1. 5 days 2. 0 days 3. 15 days 4. 30 days

0 days Discontinuance of the group policy or contract does not reduce the required time limit for providing notice of claim or proof of loss.

The Commissioner believes that an insurance rule or regulation has been violated, and decides to call a disciplinary hearing. How many days before a hearing must the Commissioner issue a notice to the person charged with a violation? 1. 7 days 2. 20 days 3. 10 days 4. 30 days

10 days The Commissioner must notify the accused 10 days prior to the hearing.

How many days does a producer have to remit the collected premiums to the insurer? 1. 5 business days 2. 10 calendar days 3. 3 business days 4. 30 calendar days

5 business days All premiums must be remitted to the insurer within 5 business days after receipt of funds.

An insurance producer is acting as a broker when he or she negotiates for an insurance contract on behalf of 1. Another insurance producer 2. A client 3. The insurer 4. A financial institution

A client When an insurance producer negotiates for an insurance contract on behalf of a client, the producer is acting as a broker.

Who is a third-party owner? 1. AN employee in a group policy 2. An irrevocable beneficiary 3. A policyowner who is not the insured 4. An insurer who issues a policy for two people

A policyowner who is not the insured Third-party owner is a legal term used to identify an individual or entity that is not an insured under the contract, but that has a legally enforceable right under it.

The term "illustration" in a life insurance policy refers to 1. A depiction of policy benefits and guarantees. 2. A presentation of nonguaranteed elements of a policy 3. Charts and graphs 4. Pictures accompanying a policy

A presentation of nonguaranteed elements of a policy The term "illustration" means a presentation or depiction that includes nonguaranteed elements of a policy of individual or group life insurance over a period of years.

What is a branch office? 1. An office in this state where the licensee conducts insurance business, other than a principal office 2. The insurer's principal office in this state 3. The licensee's principal office 4. The insurer's office in another state where nonresident producers conduct business

An office in this state where the licensee conducts insurance business, other than a principal office A branch office is an office in New Jersey other than a principal office where a resident licensee conducts insurance business.

If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered 1. A legal representation of the Association. 2. An unfair trade practice. 3. A misrepresentation. 4. A required disclosure.

An unfair trade practice. It is an unfair trade practice to make any statement that an insurer's policies are guaranteed by the existence of the Insurance Guaranty Association. Though it is illegal to advertise, the statement is still true and would not be considered a misrepresentation.

To be issued a business entity producer license by the Commissioner, the business entity must have how many partners or officers licensed as producers? 1. No more than 2 2. At least 3 3. No more than 5 4. At least 1

At least 1 The business entity must have at least 1 partner or officer who holds a valid insurance producer license.

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? 1. Buyer's Guide 2. Illustrations 3. Policy Summary 4. Insurance Index

Buyer's Guide The Buyer's Guide is a consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process. It is a generic guide that does not address the specific policy of the insurer, instead explaining life insurance in a way that the average consumer can understand.

If a violation of the New Jersey insurance code were to occur, a cease and desist order and/or penalty may be issued. Who may issue a cease and desist order? 1. Commissioner 2. Insurance Company 3. Department of Banking and Insurance 4. Governor

Commissioner In New Jersey, a cease and desist order is an order issued by the Commissioner. An administrative penalty is a sanction imposed by the Commissioner on an insurance producer or insurance company.

All advertisements pertaining to life insurance policies are the responsibility of the 1. Commissioner 2. Agency that produces them 3. Consumer Protection Agency 4. Insurer

Insurer All advertisements are the responsibility of the insurer.

All of the following statements concerning dividends are true EXCEPT 1. The stem from favorable underwriting experience 2. Lower insurance company costs generate higher dividends 3. Favorable investment results generate higher dividends 4. Dividend amounts are guaranteed in the policy

Dividend amounts are guaranteed in the policy Dividends cannot be guaranteed.

When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount? 1. In lesser amounts for the remaining policy term of age 100 2. Equal to the original policy for as long as the cash values will purchase 3. The same as the original policy minus the cash value 4. Equal to the cash value surrendered from the policy

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 as a period of time as the cash will buy at the insured's current age.

Which of the following regulatory authorities participated in creating the National Do Not Call Registry? 1. SEC 2. FTC 3. NAIC 4. BBB

FTC The Federal Trade Commission (FTC) and the Federal Communications Commission (FCC) created the National Do Not Call Registry, allowing consumers to include their telephone numbers on the list to which solicitation calls cannot be made by telemarketers.

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 1. Cost of living provision 2. Guaranteed insurability rider 3. Paid-up additions option 4. Nonforfeiture option

Guaranteed insurability rider The Guaranteed Insurability rider allows the policyowner to purchase specific amounts of additional insurance at specific dates or events, without proving continued insurability. Rates for the additions are based upon attained age.

The type of term insurance that provides increasing death benefits as the insured ages is called 1. Age-sensitive term 2. Intereste-sensitive term 3. Flexible term 4. Increasing term

Increasing term Increasing term insurance provides an increase in the death benefit each year. The coverage is usually structured to provide a death benefit equal to the amount of premium paid on a permanent life insurance policy, or to provide a death benefit equal to the cash value accumulation in a permanent policy; however, it can be written as a stand-alone policy for the individual that has a need for increasing amounts of insurance.

What is the benefit of choosing extended term as a nonforfeiture option? 1. It matures at age 100 2. It has the highest amount of insurance protection 3. It can be converted to a fixed annuity 4. It allows for coverage to continue beyond maturity date

It has the highest amount of insurance protection Under this option the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy. The duration of the new term coverage lasts for as long a period as the amount of cash value will purchase.

What significance did U.S. vs. South-Eastern Underwriters have on the insurance industry? 1. It determined that insurance licenses should no longer be issued by the federal government and should instead be issued by individual states. 2. It determined that insurance licenses should no longer be issued by the individual states and should instead be issued by the federal government. 3. It reversed the decision of Paul vs. Virginia, determining that insurance is not interstate commerce and should not be regulated federally. 4. It reversed the decision of Paul vs. Virginia, determining that insurance is interstate commerce and should be regulated federally.

It reversed the decision of Paul vs. Virginia, determining that insurance is interstate commerce and should be regulated federally. In 1942, the Attorney General of the United States filed a brief on the Sherman Act against the South-Eastern Underwriters Association, a cooperative rating bureau, alleging that the bureau constituted a combination in restraint of trade. In 1944, the Supreme Court reversed its decision of Paul vs. Virginia, stating that insurance is interstate commerce and is therefore subject to regulation by the federal government. This decision stands today.

What significance did Paul vs. Virginia have on the insurance industry? 1. It was decided that insurance required a separate federal regulatory agency from Securities products. 2. It was decided that insurance licenses should not be issued by the federal government and should instead be issued by individual states. 3. It was decided that insurance was not interstate commerce and could not be regulated by the federal government. 4. It was decided that insurance was interstate commerce and should therefore be regulated by the federal government.

It was decided that insurance was not interstate commerce and could not be regulated by the federal government. Samuel Paul represented New York insurance companies in his state. Paul challenged the right of the state to regulate insurance by refusing to obtain a license from the state. When he continued to sell insurance without a license, he was arrested and fined. The case was carried all the way to the United States Supreme Court, where it was finally decided in 1869. The Supreme Court stated that insurance was not interstate commerce.

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? 1. Joint and survivor 2. Life income with period certain 3. Fixed-amount 4. Single life

Life income with period certain The life income with period certain option guarantees payments for the life of the recipient and also specifies a guaranteed period of continued payments. If the recipient should die during this period, the payments would continue to a designated beneficiary for the remainder of the period.

Untrue statements on the application unintentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called 1. Warranties 2. Common errors 3. Material misrepresentations 4. Fraudulent statements

Material misrepresentations A material misrepresentation is a statement that, if discovered, would alter the underwriting decision of the insurance company.

A nonresident licensed producer decides to conduct business under an assumed name. Which of the following is true? 1. The assumed name must be submitted on the Uniform Assumed Title form, with the appropriate fee. 2. Nonresident producers need to take no action before conducting business under an assumed name. 3. The assumed name must be filed with the NAIC, the Commissioner of the domicile state, and the Commissioner of the state for which the nonresident producer is licensed. 4. Nonresident producers may not conduct business under any name besides legal names.

Nonresident producers may not conduct business under any name besides legal names. the Department. A nonresident licensed producer cannot conduct business under a name other than its legal name in the state where it maintains a residence.

The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the 1. Paid-up additions. 2. Paid-up option 3. One-year term option 4. Accelerated endowment

One-year term option The dividend is utilized to purchase one-year term insurance.

Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? 1. Option B 2. Variable option 3. Option A 4. Corridor option

Option B Under Option B the death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases. At any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value.

Which of the following is an example of a producer being involved in an unfair trade practice of rebating? 1. Inducing the insured to drop a policy in favor of another one when it is not in the insured's best interest 2. Charging a client a higher premium for the same policy as another client in the same insuring class 3. Making deceptive statements about a competitor 4. Telling a client that their first premium will be waived if the client purchases the policy from the producer

Telling a client that their first premium will be waived if the client purchases the policy from the producer Rebating is defined as offering any inducement in the sale of insurance products that is not specified in the policy, including money, reductions in commissions, promises, and personal services. Both the offer and acceptance of a rebate are illegal.

The primary beneficiary of her husband's life policy found that no settlement option was stated in the policy on the date of her husband's death. Who will select the settlement option in this case? 1. The Court 2. The beneficiary 3. The insurance company 4. The benefit must be paid in a lump sum

The beneficiary If a settlement option is not selected by the policyowner before the insured dies, then the beneficiary can choose the option.

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? 1. Since it is the policyowner, and not the insured, who has become disabled, the life insurance policy will not be affected. 2. The insured's premiums will be waived until she is 21. 3. 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. 4. The premiums will become tax deductible until the insured's 18th birthday.

The insured's premiums will be waived until she is 21. 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.

All of the following are true of an annuity owner EXCEPT 1. The owner pays the premiums on the annuity. 2. The owner must be the party to receive benefits. 3. The owner has the right to name the beneficiary. 4. The owner is the party who may surrender the annuity.

The owner must be the party to receive benefits. The "owner" is the person who purchases the contract and has all of the rights such as naming the beneficiary and surrendering the annuity. The owner, however, does not have to be the one who receives the benefits; it could be the annuitant (if different from the owner) or the beneficiary.

The policyowner of a Universal Life policy may skip paying the premium and the policy will not lapse as long as 1. The policy contains sufficient cash value to cover the cost of insurance. 2. The previous premium payments were high enough to create an excess of premium. 3. The policyowner cannot skip premiums without the policy lapsing. 4. The next month's premium is sufficient to cover both the current premium amount and the skipped amount.

The policy contains sufficient cash value to cover the cost of insurance. In Universal Life Insurance, the policyowner may skip a premium payment without lapsing the policy as long as the policy contains sufficient cashvalue at the time to cover the cost of insurance for that premium period.

Whose responsibility is it to make certain that an application for insurance is filled out completely and correctly? 1. The applicant 2. The beneficiary of the applicant 3. The producer 4. The insurance company

The producer It is the responsibility of the producer (agent) to make sure an application for insurance is filled out completely and correctly.

All of the following are requirements for life insurance illustrations EXCEPT 1. They must identify nonguaranteed values. 2. They must differentiate between guaranteed and projected amounts. 3. They may only be used as approved. 4. They must be part of the contract.

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 nonguaranteed values in the contract, but they must be specifically labeled as projected, not guaranteed values.

Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE? 1. Policy loans are taxable distributions. 2. Accumulations are tax deferred. 3. Withdrawals are not taxable. 4. Distributions before age 59 1/2 incur a 10% penalty on policy gains.

Withdrawals are not taxable. Any distributions from MECs are taxable, including withdrawals and policy loans. All of the other statements are true.