Primerica

Which statement is NOT true regarding a Straight Life policy?

Its premium steadily decreases over time, in response to its growing cash value.

All of the following are TRUE of the federal tax advantages of a qualified plan EXCEPT

At distribution, all amounts received by the employee are tax free.

Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?

Cash surrender: once cash surrender value is paid, the contract is over

The provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is called the

Entire contract: limits the use of evidence other than the contract and attached application in a test of the contract's validity. This is a MANDATORY provision in life insurance.

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 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.

Which of the following statements concerning a Simplified Employee Pension plan (SEP) is INCORRECT?

SEPs are suitable for large companies

Social Security was created to provide all of the following benefits EXCEPT

Unemployment income

Which of the following premium payment modes will incur the lowest overall payment?

annual

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?

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

During partial withdrawal from a universal life policy, which portion will be taxed?

interest

An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy?

$50,000

Noncompliance with the regulation regarding fees charged by producers may result in which of the following penalties?

Fines and license suspension or revocation

In which of the following situations is it legal to limit coverage based on marital status?

It is never legal to limit coverage based on marital status

An insured has a continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. What dividend option could she use?

Paid-up option 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.

Under Colorado's Unfair Claims Practices regulations, when denying a claim an insurer must do all of the following EXCEPT

Pay a claim that occurs after the grace period has ended. A claim that occurs during a grace period of a policy is covered, the insurer will simply deduct premium owed from the claim and pay the rest up to a limit, if one is indicated on the policy. Once the grace period ends, a policy expires and no further claims are valid.

All of the following are unfair claims settlement practices EXCEPT

Suggesting negotiations in settling the claim.

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?

The insurer will pay the full death benefit from the group policy to the beneficiary.

All of the following are true of an annuity owner EXCEPT

The owner must be the party to receive benefits.

Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE?

Withdrawals are not taxable

The insured is also the policyowner of a whole life policy. What age must the insured attain in order to receive the policy's face amount?

100

Which of the following is the required number of participants in a contributory group plan?

75%

If the Commissioner believes a person is engaged in unfair business practices, what should the Commissioner do?

Conduct a hearing for the person to show cause Once the Commissioner has reasonable grounds to believe that a person has violated insurance laws, the Commissioner must conduct a hearing to allow the person to defend themselves. Upon failure of the person to redeem their actions, the Commissioner may impose fines or suspend or revoke the person's license.

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

A Return of Premium term life policy is written as what type of term coverage?

Increasing Return of premium (ROP) life insurance is an increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid.

Why is an equity indexed annuity considered to be a fixed annuity?

It has a guaranteed minimum interest rate.

All of the following are true of key person insurance EXCEPT

The plan is funded by permanent insurance only.

Which of the following would NOT be considered an unfair and deceptive practice?

controlled business All are unfair and deceptive practices except for controlled business. (False advertising, misrepresentation, Boycott, coercion and intimidation

What is another name for interest-sensitive whole life insurance?

current assumption whole life

If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select?

fixed period

A domestic insurer issuing variable contracts must establish one or more

separate accounts

Which of the following is TRUE regarding the premium in term policies?

the premium is level

All of the following are true about variable products EXCEPT

the premiums are invested in the insurer's general account

Which of the following is INCORRECT regarding a $100,000 20-year level term policy?

At the end of 20 years, the policy's cash value will equal $100,000.

All of the following are personal uses of life insurance EXCEPT

Buy-sell agreement.

Which of the following would NOT constitute a policy replacement?

Converting group coverage to individual coverage Converting coverage from group to individual is not considered a replacement.

What characteristic makes whole life permanent protection?

Coverage until death or age 100

According to the Colorado fraud statutes, every licensed insurance company doing business in Colorado is required to do all of the following EXCEPT

Pay a fee to the state of Colorado to protect the insurer against fraud. Insurers are not required to pay any fees to the state of Colorado to protect the insurer against fraud. They are, however, required to prepare and follow an anti-fraud plan, which includes reporting fraud and protecting consumers from fraudulent activities.

Colorado's Insurable Interest Act allows all of the following EXCEPT

Stranger-originated life insurance. Stranger-originated life insurance means an act, practice, or arrangement to initiate a life insurance policy for the benefit of a third-party investor who, at the time of policy origination, has no insurable interest in the insured. Stranger-originated life insurance is prohibited under the Colorado Insurable Interest Act.

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?

The full death benefit

An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT?

The insured may choose to convert to term or permanent individual coverage.

Which of the following determines the cash value of a variable life policy?

The performance of the policy portfolio

Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?

Universal Life - Option A

In a survivorship life policy, when does the insurer pay the death benefit?

Upon the last death

An insurer who willfully violates a single provision of an unfair trade practice regulation may be fined

$30,000 In Colorado, an insurer who knew or reasonably should have known it was in violation could be fined up to $30,000 for each violation, not to exceed an aggregate of $750,000 annually.

As part of the continuing education (CE) requirement, what is the minimum number of hours of CE specific to annuities that must be completed for each license renewal period?

4 Insurance producers who sell annuities are required to complete 4 hours of continuing education related to annuities every licensing period.

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. If the applicant has misstated his or her age or gender on the application, the insurer, in the event of a claim, is allowed under this provision to adjust the benefits to an amount that the premium at the correct age or gender would have otherwise purchased.

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.

The automatic premium loan provision is activated at the end of the

Grace period: provided there is sufficient cash value in the policy, this provision triggers a loan at the end of the grace period to keep a policy in force

In group life policies in this state, when may the insurer use suicide as a cause of death as a defense against paying a claim?

If the suicide occurs during the first year of coverage The suicide of a policyholder after the first policy year of any life insurance policy issued by any life insurance company in this state will not be a defense against the payment of a life insurance policy, whether the suicide was voluntary or involuntary, and whether the policyholder was sane or insane.

An insured buys a 5-year level premium term policy with a face amount of $10,000. The policy also contains renewability and convertibility options. When the insured renews the policy in 5 years, what will happen to the premium?

It will increase because the insured will be 5 years older than when the policy was originally purchased.

A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that?

Joint Life Policy

What is the name of the insured who enters into a viatical settlement?

Viator

A producer's license has been suspended for noncompliance with continuing education requirements. What is the producer's duty regarding the license?

Promptly return it to the Commissioner If a producer's license has been suspended, revoked, or terminated for any reason, it must be surrendered or returned to the Commissioner within 15 days.

An attempt by the existing insurer to dissuade a current policyowner from the replacement of existing life insurance is known as

Conservation The act of trying to discourage a policyholder from replacing the existing policy is called "conservation effort".

Which of the following is TRUE regarding the accumulation period of an annuity?

It is a period during which the payments into the annuity grow tax deferred.

In which of the following situations has replacement occurred?

A policyowner borrows 25% of their cash value to buy a new policy. Borrowing any portion of an existing life insurance policy's cash value to purchase a new policy constitutes a replacement transaction and requires following replacement rules.

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 A decreasing term policy's face amount decreases as the amount of debt is reduced.

What are the two components of a universal policy?

Insurance and cash account

If a company has transacted insurance in this state without a Certificate of Authority, which of the following is true of its obligations for the policies sold?

The company can still be liable for its policies in any court of this state The failure of a company transacting insurance business in Colorado to obtain a certificate of authority will not impair the validity of any act or contract of such company and shall not prevent such company from defending any action in any court of this state.

All of the following are prohibited by individuals when using senior-specific designations EXCEPT

The individual has earned the designation from a for-profit organization. Prohibited use of senior-specific certifications includes a certification by a producer who has not actually earned such certification, nonexistent certifications, a certification that implies a level of education (or experience) that the producer does not have.

When group life insurance policies are issued in this state by a company not organized under the laws of Colorado, they may contain which of the following provisions?

Any provision required by the law of the state under which the company is organized. Policies of group insurance, when issued in Colorado by any company not organized under the laws of Colorado, may contain any provision required by the law of the state under which the company is organized. Policies issued in other states or countries by companies organized Colorado may contain any provision required by the laws of the state, territory, district, or country in which the same are issued.

Which type of insurers will be held liable for their actions in court?

All companies: authorized and unauthorized The failure of a company transacting insurance business in Colorado to obtain a certificate of authority will not impair the validity of any act or contract of such company and shall not prevent such company from defending any action in any court of this state.

If the consumer refuses to provide relevant information requested by the insurer or producer, or fails to provide complete or accurate information,

An insurance producer has no obligation to assure that a recommendation is suitable for the consumer. An insurance producer has no obligation to assure that a recommendation is suitable for the consumer under such circumstances; however, an insurance producer's recommendation must be reasonable under all of the circumstances actually known to the producer at the time that any recommendation is being made and is subject to suitability requirements based on that knowledge.

What is the suicide exclusion designed to do?

Exclude suicide committed during the first policy year The suicide exclusion was designed to prevent adverse selection and eliminate claims made by insured who purchased a policy with a suicide in mind. A suicide claim will be denied in the first year of the policy, but covered after that.

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

Issue an emergency cease and desist order The Commissioner may issue an emergency cease and desist order if he believes that an unauthorized person is engaging in the business of insurance in violation of the provisions of the insurance code and if it appears that the alleged conduct is fraudulent, creates an immediate danger to the public safety, or is causing or can be reasonably expected to cause significant, imminent, and irreparable public injury.

When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option?

a fixed amount

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?

Joint Life

What happens when a policy is surrendered for its cash value?

-Coverage ends and the policy cannot be reinstated. Once the cash surrender value option is selected, the coverage is terminated and the policy cannot be reinstated.

Which of the following is NOT considered to be a legal example of an insurable interest in Colorado?

A STOLI agreement STOLIs violate the principle of insurable interest, and are considered an unfair or deceptive practice, and are prohibited in this state. All other answer choices are examples of individuals who may have an insurable interest in the insured

Large Group Life Insurance underwriting takes all of the following into consideration EXCEPT: A. The nature or purpose of the group B. The level of participation by the group C. The Health of each individual in the group D. The size of the group

The health of each individual in the group. Large group asks no health questions of individuals but underwrites based on the nature of the group and its participation.

Whenever the Commissioner issues a cease and desist order, how will that order be delivered to the person in violation?

by certified mail The Commissioner may serve a cease and desist order that contains a statement of the charges, which must be delivered by registered or certified mail, with return receipt requested, at the person's last known address.

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.

What percentage of a company's employees must take part in a noncontributory group life plan?

100% If the employer pays all of the premium, all employees must be covered to avoid adverse selection.

Which of the following documents must be provided to the policyowner or applicant during policy replacement?

Notice Regarding Replacement During policy replacement, the replacing producer must present to the applicant a Notice Regarding Replacement that is signed by both the applicant and the producer.

All of the following are true regarding a decreasing term policy EXCEPT

The payable premium amount steadily declines throughout the duration of the contract.

If the annuitant dies during the accumulation period, who will receive the annuity benefits?

Beneficiary If the annuitant dies during the accumulation period, the beneficiary receives benefits from the annuity: either the amount paid into the plan or the cash value - whichever is greater.

Two individuals are in the same risk and age class; yet, they are charged different rates for their insurance policies due to an insignificant factor. What is this called?

Discrimination. Permitting individuals of the same class to be charged a different rate for the same insurance is the unfair trade practice of discrimination.

When an insurance producer receives an application for an annuity contract, the producer must give the applicant a copy of which of the following documents?

All disclosure documents and the Buyer's Guide When an insurance producer receives an application for an annuity contract, the producer must give the applicant a copy of the approved disclosure document and a copy of the approved Buyer's Guide to Fixed Deferred Annuities.

The main difference between immediate and deferred annuities is

when the income payments begin

A purchaser of life insurance policy has the right to return the policy for a full refund of the premium if done within

15 days of its delivery Life insurance policies must contain a prominently displayed no-loss cancellation clause enabling the insured to return the policy within 15 days of the receipt of the policy with return in full of any premium paid.

Which of the following is a feature of a variable annuity?

Benefit payment amounts are not guaranteed.

In insurance, producers are permitted to share or split commissions, providing that

Both are properly licensed for the line of insurance

Which policy component decreases in decreasing term insurance?

Face amount

All of the following are business uses of life insurance EXCEPT

Funding against company's general financial loss.

Which of the following is NOT true regarding a nonqualified retirement plan?

It needs IRS approval

If the policyowner, the insured, and the beneficiary under a life insurance policy are three different people, who has the ownership rights?

Policyowner Only the policyowner has the ownership rights under the policy, and not the insured or the beneficiary.

Under an extended term nonforfeiture option, the policy cash value is converted to

The same face amount as in the whole life policy

Which of the following is NOT true of life settlements?

The seller must be terminally ill