Primerica Bonus Exam

Which of the following entitles is considered the principal? 1. the producer or agent soliciting the policy 2. the director of the insurance company 3. the head of the department of insurance 4. the insurer issuing a policy

4. the insurer issuing a policy The insurer ( or principal) is the company or organization that issues a policy of insurance

In which of the following scenarios will the life insurance proceeds to be protected from the creditors? 1. when the benefits are not paid out to the insured or any person affecting the insurance 2. when they cover the beneficiary's debt 3. when the insured and the beneficiary are the same person 4. when the administrator of the insured is the payee of the policy

1. when the benefits are not paid out to the insured or any person affecting the insurance The proceeds of a life insurance policy are to be received by the beneficiary, assignee or payee of the policy against the creditors and representatives of the insured unless the beneficiary is the insured, the administrator of the insured, or any person affecting the insurance.

Answers to questions in an insurance application are called representations and, as such, they are 1. Warranties 2. Believed to be true to the best of the applicant's knowledge 3. Absolutely true 4. Not true

2. Believed to be true to the best of the applicant's knowledge Representations are statements that an insurance applicant believes to be true to the best of his or her knowledge

In life insurance, which of the following is NOT required to have an insurable interest in the insured? 1. beneficiary 2. policyowner 3. insured 4. applicant

1. beneficiary the beneficiary does not have an insurable interest in the life of the insured

The entire contract includes all of the following except 1. A copy of the application 2. Any riders or amendments 3. A buyer's guide 4. The life insurance policy.

3. A buyer's guide The entire contract includes: 1. The policy 2. a copy of the application 3. any riders or amendments

Which of the following would be required to complete the producer licensing requirements? 1. agency supervisor whose actions do not include selling insurance 2. a person whose activities are limited to insurance advertising 3. an officer of an insurer who does not receive commissions 4. a customer service representative who discusses policies

4. A customer service representative who discusses policies Customer service representatives who discuss policies are required to have a producer's license

All of the following are required for HIV testing except 1. If HIV is present, the applicant's physician must be notified 2. The applicant must be notified that HIV testing will be done 3. The proper protocol must be following in performing the test 4. If HIV is present, the person may be rate, but they cannot be declined

4. If HIV is present, the person may be rate, but they cannot be declined A person with the HIV can be declined

Applicants for an individual producer license must submit proof of completing certain number of hours of approved continuing education credits. How many hours are required? 1. 24 2. 32 3. 48. 4. 18

1. 24 Applicants for an individual producer license must submit proof of completing 24 hours of approved continuing education credits during the previous 2 years

An insurer must notify the consumer in writing that an investigative consumer report has been requested, within how many days of the initial request 1. 3 days 2. 5 days 3. 10 days. 4. 30 days.

1. 3 days if a consumer report is requested, the insurer must notify the consumer at least 3 days following the initial request

The guaranteed insurability rider allows the owner to purchase additional amounts of life insurance without proof of insurability at all of the following except 1. Birth of a child 2. marriage 3. purchase of a new home 4. approximately every 3 years between the ages of 25 and 40.

3. purchase of a new home he guaranteed insurability rider allows the owner to purchase additional amounts of insurance without proof of insurability at marriage, birth of a child, and/or every 3 uears or so between the ages of 25 and 40.

All of the following are advantages of a qualified retirement plan EXCEPT: 1. the income at retirement is tax free. 2. the contribution is deductible to the employer 3. the contribution is not taxable to the employee when made. 4. the funds grow tax deferred

1. The income at retirement is tax free In qualified plan any amounts not previously taxed will be taxed when the funds are received.

If a life insurance company uses HIV testing as part of its underwriting, when must an applicant be notified of the procedure? 1. Prior to solicitation of the policy 2. prior notice is not required 3. prior to performance of the test 4. prior to ordering a physical's examination

3. prior to performance of the test Prior to testing, the insurer must disclose in writing its intent to test the applicant for the Human Immunodeficiency virus infection or for a specific health condition derived from HIV. the insurer must obtain the applicant's written informed consent to administer the test.

Which of the following is a provision found in life insurance policies? 1. Return of premium 2. Guaranteed insurability 3. Payor Benefit 4. Reinstatement

4. Reinstatement Reinstatement is the only policy provision; the rest are policy riders

An insurance company that is owned by the policyholders is called a 1. Reciprocal insurer 2. Mutual insurer 3. Fraternal insurer 4. Stock insurer

2. Mutual insurer Mutual companies are owned by the policyowners and issued participating policies

An insured and his spouse recently had a child. Which of the following riders would allow the couple to insure the child for a limited period of time at a specified amount? 1. payor rider 2. guaranteed insurability rider 3. spouse term rider 4. children's term rider

4. Children's term rider The children's term rider allows children to be added to coverage for a limited period of time for a specified amount

Which statement below is incorrect regarding the type of term insurance that fits best with the applicant's needs? 1. applicants who may require a larger death benefit in the future should buy convertible term insurance 2. applicants concerned with the increasing cost of living should purchase increasing term 3. Applicants wishing to pay off a mortgage should they suffer a premature death might buy a decreasing term plan. Employers looking to provide cost effective group life insurance for their employees may choose annual renewable term.

1. Applicants who may require a larger death benefit in the future should buy convertible term insurance Convertible term converts to a cash value policy with the same death benefit but at a higher premium

Which of the following is True regarding premium in a 10-year level premium policy? 1. The premium will be level for the first few years of the policy, but will increase by the 10th year. 2. The premium will remain level for 10 years. 3. The premium will remain the same at renewal 4. The premium will decrease at the end of the term

2. The premium will remain level for 10 years. Level premium term insurance provides a level death benefit and a level premium during the policy term. If the policy renews at the end of a specified period of time, the policy premium will be adjusted to the insured's age at the time of renewal

A new homebuyer wants to purchase a life insurance policy that would protect his family against losing the home, should he die before the mortgage was paid. The most inexpensive type of policy that would accomplish this need would be 1. Increasing term 2. Flexible Term 3. Level Term 4. Decreasing term

4. Decreasing Decreasing term insurance may be written so that the face decreases at the same rate as the principal amount of mortgage

J is receiving fixed amount benefit payments from his late wife's insurance policy. He was told that if he dies before all of the benefits are paid, the remaining amount will go to the contingent beneficiary. Which settlement option did J choose? 1. Fixed Period 2. Interest Only 3. Join and Survivor 4. Fixed Amount

4. Fixed Amount The fixed-amount option pays a fixed, specified amount in installments until the proceeds (principal and interest) are exhausted. The recipient selects a specified fixed dollar amount to be paid until it is gone. If the beneficiary dies before the proceeds are exhausted, installments will continue to be paid to a contingent beneficiary until all proceeds have been paid out

The reduction of premium option uses to dividend to reduce 1. This year's premium 2. The previous year's premium 3. The premium on any other policy owned by the policyowner 4. Next year's Premium

4. Next year's premium With the reduction of premium option, the insurer uses the dividend to reduce the next year's premium

All advertisements, regardless of their source of creation are the responsibility of the 1. insured 2. advertising agency 3. department of insurance 4. insurer

4. insurers insurers monitor all advertising, whether by the company of their agents. Agents are representatives of the insurer.

In order to reinstate a life insurance policy the insured must do all of the following except 1. Repay any outstanding loans and interest 2. pay next year's premium in advance 3. pay back premiums 4. pay any interest due on back premiums

2. pay next year's premium in advance in order to reinstate the owner must pay all back premiums plus interest and repay any outstanding loans and itnerest

In the U.S. vs. South-Easter Underwriters Association, which of the following was the decision of the Supreme Court? 1. Insurance is sometimes interstate commerce and is therefore sometimes subject to regulation by the federal government 2. the case was dismissed on this level 3. Insurance is interstate commerce and is therefore subject to regulation by the federal government 4. insurance is NOT interstate commerce and is therefore NOT subject to regulation by the federal government

3. Insurance is interstate commerce and is therefore subject to regulation by the federal government In 1944, the supreme court reversed its decisions of Paul vs. Virginia, stating that insurance is interstate commerce and is therefore subject to regulation by the federal government. This decision stands today

An applicant for surplus lines authority must do all of the following Except 1. Posses a certificate of authority in this state 2. Hold a property and casualty license 3. Be allowed to write business in this state 4. Be considered a resident of this state

1. Possess a certificate of authority in this state A surplus lines agent is a person or organization that is allowed to write business in New Jersey for insurance companies that do not possess a certificate of authority in New Jersey if no authorized insurers in New Jersey offer the specific type of insurance in question. A property and casualty license is required

Which of the following would be considered a violation of Life Insurance Advertising regulation? 1. Calling an insurance policy an investment plan 2. Not guaranteeing dividends 3. Making oral sales presentations. 4. Informing the applicant the sole subject of the sale is insurance.

1. Calling an insurance policy an investment plan Insurance policies may not be sold as investment plans; their sole purpose is insurance

A group health insurance policy owner allows the policy to lapse, and fails to reinstate the policy after the grace period expires. To what extent will the insurer cover valid claims made before the end of the grace period? 1. The insurer is liable of all valid claims made 2. The insurer pays 50/50 of any covered losses of insureds 3. The insurer will pay on a case-by-case basis 4. The insurer is not liable for any claims made

1. The insurer is liable for all valid claims made If a group life or group health policy provides for automatic discontinuance of the policy for nonpayment of premium (after the grace period), the insurer is still liable for valid claims of covered losses incurred before the end of the grace period

Where are premiums from fixed annuities invested? 1. Hedge fund 2. Separate account 3 general account 4. variable annuity

3. General account a fixed annuity is characterized by a general account into which the purchase payments(premiums) are invested

An employee dies having 6 quarters of coverage during the previous 13-quarter period. What status of coverage does the employee have under social security? 1. Uninsured 2. conditionally insured 3. currently insured 4. fully insured

3. currently insured Before becoming full insured, workers may achieve the status of currently insured ( or partially insured), and by that qualify for certain benefits. An individual is considered partially insured if he or she has earned 6 credits ( or quarters of coverage) during the 13-quarter period ending with the quarter in which the insured dies or becomes disabled.

What does the state Life and Health insurance Guaranty Association guard against? 1. Insurance fraud 2. Overinsurance 3. Unfair trade practices 4. Insurer insolvency

4. Insurer Insolvency All admitted insurers must be a member of the Insurance Guaranty Association as a condition of their license. The insurance Guaranty Association is in existence to protect policyowners and beneficiaries against losses cause by the insolvency of an insurance company

All of the following are true of credit life except 1. The creditor is the policyowner 2. the insured names the beneficiary 3. the death benefit cannot exceed the amount of the loan 4. The premium payment is included in the loan payment

2. The insured names the beneficiary With credit life the lending institution is the owner and names the beneficiary

All of the following are true regarding the federal Fair credit Reporting act except 1. The customer must be notified if adverse is taken as a result of a report 2. Reports may be sent to anyone who requests one 3. Insurers are not required to give customers a copy of the report 4. It applies to credit reports ordered in connection with insurance, banking and employment

2. Reports may be sent to anyone who requests one Credit reports may only be ordered by those involved in insurance underwriting, bank loans, or employment, so they cannot be ordered by just anyone, if adverse action is taken, an insurer must tell the insured which credit reporting agency furnished the report, but the insurer does not have to furnish a copy of it. If a report is wrong, there are procedures to get it corrected without the need of filing a lawsuit (litigation)

If an insurance company issues a policy even though some questions on the application were unanswered, when can the insurer get the answers to those questions? 1. within 30 days of issuing the policy 2. at any time within the incontestable period 3. never; the insurer has waived its right to those answers by issuing the policy 4. within 3 months of issuing the policy

3. Never; the insurer has waived its right to those answers by issuing the policy If an insurer accepts an application with unanswered questions and issues the policy, it has waived its right to those answers

An agent who knowingly misrepresents material information for the purpose of inducing an insured to lapse, forfeit, change or surrender a life insurance policy or annuity has committed an illegal practice known as 1. fraud 2. concealment 3. misrepresentation 4. twisting

4. Twisting This is the definition of twisting, which is an unfair trade practice

When an insured terminates membership in the insured group, the insured can convert to 1. Term with proof of insurability 2. Whole life without proof of insurability 3. Whole life with proof of insurability 4. Term without proof of insurability

2. Whole life without proof of insurability When a member terminates membership in a group, he or she can convert to whole life without proof of insurability.

Which statement is an accurate description of life insurance policy dividends? 1. They are guaranteed to be paid and they are taxable as income 2. They are likely to be larger in nonparticipating policies 3. They are not taxable are not guaranteed 4. They are paid as return of premium to policyowners by stock insurers

3. They are not taxable and are not guaranteed Policy dividends, considered a return of excess premium by a mutual insurer, are not taxable since the original premium was paid with after-tax dollars. Future dividends cannot be predicted nor guaranteed

In contrasting stock insurers with mutual insurers, which statement is true 1. Nonparticipating policies can pay out dividends to the policyholders 2. Mutual insurers are owned by the shareholders and issue participating policies 3. stock insurers are owned by the shareholders and issue nonparticipating policies 4. Stock dividends are tax free while policy dividends are taxable

3. Stock insurers are owned by the shareholders and issue nonparticipating policies Stock insurers are owned by their shareholders/stockholders. Their policies are labeled nonparticipating since the insureds do not share in the divisible surplus (dividends).

According to the life insurance replacement regulations, which of the following would be an example of policy replacement? 1. term insurance is changed to a whole life policy 2. a lapse policy is reinstated within a specific timeframe 3. a policy is reissued with a reduction in cash value 4. a term policy expires, and the insured buys another term life policy.

3. a policy is reissued with a reduction in cash value Replacement means any transaction in which new life insurance or new annuity is to be purchased and it is known or should be known to the proposing producer that by reason of the transaction, existing life insurance or annuities have been or will be converted to reduced paid up insurance, continued as extended term insurance or otherwise reduced in vale by the use of nonforfeiture benefits or other policy values

An agency wants to obtain license statistics on one of its new producers. It requests a document that the insurance department can produce, which lists the producer's license status, lines of license that the producer can transact, and other information. This report is called a 1. confirmation of insurance licensure 2. producer's report 3. license statistics report 4. certification of license status

4. Certification of license status The insurance department can issue a certification of license status of any currently licensed producer or producer licensed within the past 4 years. The certification includes basic license information, including license number, types of insurance that the producer can transact, and whether the license is still in effect

The renewable provision allows the policyowner to renew the coverage at the expiration date. 1. Only with evidence of insurability. 2. With evidence of insurability if the insurer requires it. 3. With evidence of insurability if the insured risk has increased. 4. Without evidence of insurability

4. Without evidence of insurability. The renewable provision allows the policyowner the right to renew the coverage at the expiration date without evidence of insurability

An insured falls down a flight of stairs and sustains a neck injury that render him severely disabled. The insured owns a whole life policy. Is it possible for the policy to include a Waiver of Cost of Insurance rider, and if so, what insurance costs would be waived? 1. No, it is not possible to waive the cost of insurance 2. Yes, the cost of insurance and premiums used to accumulated cash value 3. No, it is not possible for this waiver to be included in a whole life policy 4. Yes, the cost of premiums used to accumulate cash value

3. No, it is not possible for this waiver to be included in a whole life policy The waiver of cost of insurance rider is found in Universal Life policies. In this example, the insured has a Whole life policy, making him ineligible

According to the "Common Disaster" clause, if the insured and primary beneficiary are killed in the same accident and it cannot be determined who died first, which of the following will be assumed? 1. The estate of the primary beneficiary and the contingent beneficiary split benefits equally 2. The insured died before the primary beneficiary 3. the primary beneficiary died before the insured 4. The deaths occurred at the same time

3. The primary beneficiary died before the insured According to the "Common Disaster" clause, if it cannot be determined who died first, the insured or the primary beneficiary it will be assumed the primary beneficiary died first, so the proceeds go to the contingent beneficiary. Proceeds will go the insured's estate only if there is no contingent beneficiary.

Dividends received on participating life insurance policies are 1. Not taxable because they are a return of unused premiums 2. Taxable because they are a return on your investment 3. Not taxable because they are a return on your investment 4. Taxable because they are a return of unused premiums

1. Not taxable because they are a return of unused premiums Dividends on participating life insurance policies are not income taxable because they are a return of unused premiums

Which of the following statements is incorrect? 1. A minor, age 15, can purchase insurance in the state of new jersey 2. A minor, age 16, can be the beneficiary on the life policy 3. If an insurer receives written notification of a legal guardian of a minor's property, the minor will not receive payment directly from the insurer 4. A minor, age 17 or younger, is not allowed to purchase insurance in the state of New Jersey

4. A minor, age 17 or younger, is not allowed to purchase insurance in the state of New Jersey The minimum age at which one can purchase an annuity or life insurance contract is 15 years. Unless the insurer receives written appointment of a legal guardian of the minor's property, the minor is considered competent to receive payment made by an insurer to the minor as an insured or beneficiary

If the policy summary for a life insurance policy is not given when the application is taken, when must the policy summary be given to the policyowner 1. When the policy is issued 2. When the policy is delivered 3. within 15 days of the application date 4. within 30 days of policy issue

2. When the policy is delivered the policy summary must be provided when the policy is delivered to the owner

If a policy contains an unconditional refund provision of at least 10 days, the buyer's guide and policy summary can be delivered at what latest possible point? 1. When the application is presented 2. When the first premium is paid 3. When the policy is delivered 4. Within 30 days of policy delivery

3. When the policy is delivered Insurers, through their producers, must provide all prospective purchasers with a buyer's guide a policy summary at least 7 days before accepting the applicant initial premium, if however, the applied for the policy contains an unconditional refund provision of at least 10 days, the buyer's guide and policy summary can be delivered with or before delivery of the policy

Which of the following is a correct statement about annuities? 1. Variable annuities place the funds into the company's general account 2. fixed annuities have the annuitant assume the risks of investment 3.fixed annuities do not provide protection against inflation 4. variable annuities provide minimum guaranteed rate of interest

3. fixed annuities do not provide protection against inflation fixed products provide protection against the risks associated with investing, since the insurance company bears the investment risks. They, however, do not provide protection against inflation; since the income (annuity) payments do not vary from one payment to the next

Guaranteeing future dividends is considered to be an unfair or deceptive act known as 1. False financial statements 2. rebating 3. Misrepresentation 4. churning

3. misrepresentations It is considered to be misrepresentation to make any false or misleading statements regarding the dividends to be received on any insurance policy

An insurer mails an insurance policy to a new policyowner. When the insurer relinquishes control of the policy, the policy is considered 1. mailed. 2. issued 3. relinquished 4. delivered

4. Delivered when the insurer relinquishes control of the policy by mailing it to the policyowner, policy is considered legally delivered

A whole life policy is surrendered for a reduced-paid up policy. The cash value in the new policy will 1. decrease over time 2. reduce to the pre-surrender value 3. continue to increase 4. remain the same

3. continue to increase the new policy continues to build its own cash value and will remain in force until the insured's death or maturity

The manner and/or frequency that the policyowner pays the policy premium is called 1. Premium mode 2. The grace period 3. Premium clause 4. Premium consideration

1. premium mode 1. The premium mode is the manner or frequency that the policyowner pays the policy premium

If a soliciting producer suspects that there could be misrepresentation on the part of the applicant for insurance, what must the producer do? 1. Refuse the applicant 2. Inform the insurance company 3. Change the applicant's answer to what the producer believes is correct 4. Erase the answer once the applicant submits the application

2. Inform the insurance company If the producer feels that there could be some misrepresentation, he/she must inform the insurance company

Which of the following could most likely be issued a resident producer license? 1. Sally lives in a neighboring state but has an office in New jersey 2. Sam lives and works in a neighboring state. 3. Julie recently moved from new jersey to a neighboring state and will no longer work in her New Jersey Office 4. Joe is actively licensed in his home state and applies for a nonresident license in New Jersey

1. Sally lives in a neighboring state but has an office in New Jersey Applicants may apply for a resident license in New Jersey if they have a home or office in New Jersey. Since Sally has an office in New Jersey, she could apply for a resident license.

Producer licenses will NOT issued to business entitles in which of the following cases? 1. One partner holds 10% share in another licensed business entity 2. The business has only one licensed producer 3. One partner's license was revoked in the previous 5 years. 4. The business is not authorized by the Secretary of State

3. One partner's license was revoked in the previous 5 years No producer license will be issued to a business entity operated by a person who has had his or her license revoked within the past 10 years

A producer's license can be suspended or revoked for all of the following actions EXCEPT 1. offering rebates while transacting insurance 2. failure to pay state income taxes 3. failure to pay child support 4. failure to generate comissions

4. Failure to generate commissions Generating commissions is not a requirement for license maintenance. All other actions are violation and may result in license suspension or revocation

An important fact about the financial status of an insurer will deliberately with withheld. Which of the following terms best describes this action 1. Defamation 2. Twisting 3. Loading 4. False financial statement

4. False financial statement Statements of this kind - when used to put the company into a favorable light - are often called false financial statements

A stock insurer is defined as an insurer 1. Owned by its policyowners 2. That invests at least 20% of its premium income in the stock market 3. That issues health care coverage for farm animals 4. Owned by its stockholders

4. owned by its stock holders A stock insurance company is owned by its stockholders who contribute the capital. Any profits of the company are paid to the stockholders as dividends on their stock. If the company loses money, the stockholders suffer the financial losses by a reduction of the value of the stock and the absence of dividends paid