Simulate Exam

Joint life

A couple receives a set amount of income from their annuity. When the wife dies, the husband no longer receives annuity payments. What type of annuity did the couple buy? a) Joint limited annuity b) Joint life c) Joint and survivor d) Life with period certain

The surrender value should be equal to 100% of the premium paid, minus any prior withdrawals and surrender charges

A deferred annuity is surrendered prior to annuitization. Which of the following best describes the nonforfeiture value of the annuity? a) The surrender value should be equal to 100% of the premium paid, minus any prior withdrawals and surrender charges. b) A deferred annuity cannot be surrendered prior to annuitization. The owner must wait until the annuitization period begins to receive any payments. c) The surrender value will be based on current interest rates. d) The surrender value will not be more than 80% of the cash value in the annuity at the time of surrender.

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

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? a) The insured's premiums will be waived until she is 21. b) The premiums will become tax deductible until the insured's 18th birthday. c) Since it is the policyowner, and not the insured, who has become disabled, the life insurance policy will not be affected. d) 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.

Required a premium increase each renewal

A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy a) Built cash values. b) Required proof of insurability every year. c) Decreased death benefit at each renewal. d) Required a premium increase each renewal.

Disclose commissions earned from the sale of the policy

A producer agent must do all of the following when delivering a new policy to the insured EXCEPT a) Collect any premium due. b) Explain the rating procedures if the policy is rated differently than applied for. c) Disclose commissions earned from the sale of the policy. d) Explain the policy provisions, riders, and exclusions.

Certain groups of employees only

A tax-sheltered annuity is a special tax-favored retirement plan available to a) Certain age groups only. b) Certain groups depending on factors such as race, gender, and age. c) Certain groups of employees only. d) Anyone.

A peril

A tornado that destroys property would be an example of which of the following a) A loss b) A physical hazard c) A peril d) A pure risk

Premiums are determined by the age, sex and occupation of each individual certificate holder

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

The plan must provide an offset for social security benefits

All of the following are general requirements of a qualified plan EXCEPT a) The plan must be communicated to all employees. b) The plan must be for the exclusive benefits of the employees and their beneficiaries. c) The plan must be permanent, written and legally binding. d) The plan must provide an offset for social security benefits.

Buy-sell agreement

All of the following are personal uses of life insurance EXCEPT a) Cash accumulation. b) Buy-sell agreement. c) Survivor protection. d) Estate creation.

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

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.

The annuitant receives a fixed amount of return

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

Benefits are paid to the borrower's beneficiary

All of the following statements are correct regarding Credit Life Insurance EXCEPT a) Benefits are paid to the borrower's beneficiary. b) The amount of insurance permissible is limited per borrower. c) Premiums are usually paid by the borrower. d) Benefits are paid to the creditor.

Employer contributions are not tax deductible

All of the following statements are true regarding tax-qualified annuities EXCEPT a) Tax accumulation is deferred. b) They must be approved by the IRS. c) Withdrawals are taxed. d) Employer contributions are not tax deductible.

Lower

All other factors being equal, what would the premium be like in a survivorship life policy as compared to the premium in a joint life policy? a) Lower b) Higher c) As high d) Half the amount

When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health

An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin? a) On the designated effective date b) On the application date c) When the agent submits the application to the company and the company issues a conditional receipt d) When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health

The interest will continue to accumulate tax deferred

An annuitant dies before the effective date of a purchased annuity. Assuming that the annuitant's wife is the beneficiary, what will occur? a) The interest will become immediately taxable. b) The premiums will increase. c) The premiums will decrease. d) The interest will continue to accumulate tax deferred.

Equity Indexed Annuity

An annuity owner is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that will equal the performance of the Standard and Poor's 500 Index. She would likely purchase a(n) a) Variable Annuity. b) Flexible Annuity. c) Immediate Annuity. d) Equity Indexed Annuity.

Single premium whole life

An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called a) Single premium whole life. b) Modified Endowment Contract (MEC). c) Level term life. d) Graded premium whole life.

Limited-pay Life

An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it? a) Variable Life b) Adjustable Life c) Graded Premium Life d) Limited-pay Life

Increases annually

Annually renewable term policies provide a level death benefit for a premium that a) Remains level. b) Fluctuates. c) Increases annually. d) Decreases annually.

Yes, but not unfairly

Are insurance company underwriters allowed to discriminate? a) No, higher risks pay higher premium b) No, discrimination is an unfair practice c) Yes, but only for gender d) Yes, but not unfairly

Guaranteed insurability

At the time the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability. This rider is called a) Waiver of cost of insurance. b) Supplemental add on. c) Cost of living. d) Guaranteed insurability.

False advertising

Circulating deceptive sales material to the public is what type of Unfair Trade Practice? a) Coercion b) Misrepresentation c) False advertising d) Defamation

Juvenile Life is classified as any life insurance purchased by a minor

Concerning Juvenile Life insurance, which of the following statements is INCORRECT? a) Usually a parent or guardian is the applicant for insurance on the life of a minor. b) It can be a limited premium payment policy. c) Juvenile Life is classified as any life insurance written on the life of a minor. d) Juvenile Life is classified as any life insurance purchased by a minor.

Not subject to income taxation by the Federal Government

Death benefits payable to a beneficiary under a life insurance policy are generally a) Exempt from income taxation if under $7,000. b) Exempt from income taxation if over $7,000. c) Not subject to income taxation by the Federal Government. d) Subject to income taxation by the Federal Government.

Erase the incorrect answer and record the correct answer

If a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT a) Note on the application the reason for the change. b) Destroy the application and complete a new one. c) Erase the incorrect answer and record the correct answer. d) Draw a line through the first answer, record the correct answer, and have the applicant initial the change.

The surrender charge is a percentage of the cash value and decreases over time

If a deferred annuity is surrendered prematurely, a surrender charge is imposed. How is the surrender charge determined? a) The surrender charge is a flat fee determined by the annuity owner when the annuity is purchased. b) The surrender charge will increase as the accumulation period increases. c) The surrender charge is a percentage of the cash value and decreases over time. d) The surrender charge is always 7% of the cash value.

Guaranteed insurability rider

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) Guaranteed insurability rider. b) Paid-up additions option. c) Cost of living provision. d) Nonforfeiture option.

Whether an insurable interest exists between the individuals

If an applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about a) The gender of the applicant. b) The type of policy requested. c) Which individual will pay the premium. d) Whether an insurable interest exists between the individuals.

The owner will receive the premium payments that have been paid into the annuity, plus any interest, minus a surrender charge

If the owner prematurely surrenders his deferred annuity before the annuitization period begins, which of the following is most likely to occur? a) The owner will forfeit any premiums he has paid into the account, but will receive any interest earned on the account. b) The owner will receive the premium payments that have been paid into the annuity, plus any interest, minus a surrender charge. c) A surrender charge will be imposed that is equal to 3 of the owner's monthly annuity payments. d) A surrender charge will not be imposed because the account has been open for at least 1 year.

Grow tax deferred

In life insurance policies, cash value increases a) Grow tax deferred. b) Are income taxable immediately. c) Are taxed annually. d) Are only taxed when the owner reaches age 65.

5

In order to qualify for conversion from a group life policy to an individual policy of the same coverage, a person must have been insured under the group plan for how many years? a) 3 b) 5 c) 10 d) 1

Executive is the owner, and the executive pays the premium

In the Executive Bonus plan, who is the owner of the policy, and who pays the premium? a) Company is the owner, and the company pays the premium. b) Executive is the owner, and the executive pays the premium. c) Company is the owner, but the executive pays the premium. d) Board of directors is the owner, and the board of directors pays the premium.

At least 1,000 employees

SIMPLE Plans require all of the following EXCEPT a) No more than 100 employees. b) Employees must receive a minimum of $5,000 in annual compensation. c) At least 1,000 employees. d) No other qualified plan can be used.

Inviting prospective clients to the grand opening of the company's new office

State law specifically prohibits using illegal inducements in the marketing of insurance. All of the following would be considered illegal inducements EXCEPT a) Inviting prospective clients to the grand opening of the company's new office. b) Issuing or delivering insurance company stock in return for purchasing insurance. c) Promising returns and profits from the purchase of insurance. d) Offering benefit certificates or securities in return for purchasing insurance.

The beneficiary will receive the greater of the money paid into the annuity or the cash value

The annuity owner dies while the annuity is still in the accumulation stage. Which of the following is TRUE? a) Because the annuitization period has not started, the owner's estate will receive the money paid into the annuity. b) The insurance company will retain the cash value and pay back the premiums to the owner's estate. c) The money will continue to grow tax-deferred until the liquidation period, and then will be paid to the beneficiary. d) The beneficiary will receive the greater of the money paid into the annuity or the cash value.

Grace period

The automatic premium loan provision is activated at the end of the a) Free-look period b) Elimination period. c) Policy period. d) Grace period.

Annually Renewable Term

The death protection component of Universal Life Insurance is always a) Adjustable Life b) Increasing Term c) Annually Renewable Term d) Whole Life

As of the application date

The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective? a) As of the policy delivery date b) As of the first of the month after the policy issue c) As of the policy issue date d) As of the application date

The policy contains sufficient cash value to cover the cost of insurance

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

The annuitant must be a natural person

The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true? a) The annuitant must be a natural person. b) A corporation can be an annuitant as long as it is also the owner. c) A corporation can be an annuitant as long as the beneficiary is a natural person. d) The contract can be issued without an annuitant.

Installments for a fixed period

Under which of the following annuity options does the annuitant select the time period for the benefits, and the insurer determines how much each payment will be a) Installment refund b) Cash refund c) Installments for a fixed period d) Installments for a fixed amount

Favorable tax treatment

What is the advantage of having a qualified annuity? a) Receiving a lump-sum settlement tax free b) Higher dividends c) Favorable tax treatment d) No filing with the IRS

50%

What is the penalty for IRA distributions that are below the required minimum for the year? a) 10% b) 25% c) 50% d) 60%

Interest only

When a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income? a) Neither principal nor interest b) Principal only c) Interest only d) Both principal and interest

Conditional

When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is a) Aleatory. b) Personal. c) Unilateral. d) Conditional.

Distributions are taxable

When contributions to an immediate annuity are made with before-tax dollars, which of the following is true of the distributions? a) Distributions are taxable. b) Distributions are nontaxable. c) Distributions cannot begin prior to age 70½. d) There are no distributions.

Alien insurer

When transacting business in this state an insurer formed under the laws of another country is known as a/an a) Admitted insurer. b) Alien insurer. c) Domestic insurer. d) Foreign insurer.

When the insured reaches age 100

When would a 20-pay whole life policy endow? a) When the insured reaches age 100 b) At the insured's age 65 c) After 20 payments d) In 20 years

Extended Term

Which nonforfeiture option has the highest amount of insurance protection? a) Conversion b) Decreasing Term c) Reduced Paid-up d) Extended Term

Universal life

Which of the following Life Insurance policies would be considered interest sensitive? a) Increasing term b) Universal life c) Adjustable life d) Whole life

The insureds' medical history

Which of the following are generally NOT considered when underwriting group insurance? a) The size of the group b) The insureds' medical history c) The nature of the group d) The group's past claim experience

The policyowner of the life insurance policy

Which of the following best defines the "owner" as it pertains to life settlement contracts? a) The insurance provider b) The policyowner of the life insurance policy c) A financial entity that sponsors the transaction d) A fiduciary for the contract

Issuing sales material with exaggerated statements about policy benefits

Which of the following best describes a misrepresentation? a) Discriminating among individuals of the same insuring class b) Issuing sales material with exaggerated statements about policy benefits c) Making a deceptive or untrue statement about a person engaged in the insurance business d) Making a maliciously critical statement that is intended to injure another person

It is level term insurance

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

Net premium plus expenses

Which of the following best describes gross annual premium? a) Basic insurance rate plus commissions b) Expense premium c) Net premium plus expenses d) Annual loading

The period of time during which accumulated money is converted into income payments

Which of the following best describes what the annuity period is? a) The period of time from the effective date of the contract to the date of its termination b) The period of time during which accumulated money is converted into income payments c) The period of time from the accumulation period to the annuitization period d) The period of time during which money is accumulated in an annuity

The earnings in the plan accumulate tax deferred

Which of the following describes the tax advantage of a qualified retirement plan? a) Distributions prior to age 59½ are tax deductible. b) Employer contributions are deductible as a business expense when the employee receives benefits. c) Employer contributions are not taxed when paid out to the employee. d) The earnings in the plan accumulate tax deferred.

Those who have been insured under the plan for at least 5 years

Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated? a) Those who have worked in the company for at least 3 years b) Those who have dependents c) Those who have no history of claims d) Those who have been insured under the plan for at least 5 years

Consumer report

Which of the following includes information regarding a person's credit, character, reputation, and habits? a) Agent's report b) Consumer report c) Consumer history d) Insurability report

Any exchange made under Section 1035 of the Internal Revenue Code must be completed within 30 days

Which of the following is NOT true of Section 1035 Policy Exchanges? a) It is an IRS Code which permits like kind exchanges of property. b) It is typically used when exchanging or replacing a less competitive life policy with a more competitive life policy. c) Any exchange made under Section 1035 of the Internal Revenue Code must be completed within 30 days. d) It requires an absolute assignment of the existing policy to the replacing company who surrenders the contract and issues a replacement policy.

It would not occur in a deferred annuity

Which of the following is NOT true regarding the accumulation period of an annuity? a) It is the period during which the annuity payments earn interest. b) It is the period over which the annuitant makes payments into an annuity. c) It is also known as the pay-in period. d) It would not occur in a deferred annuity.

Discrimination in policy benefits on the basis of life expectancies

Which of the following is a legal action? a) Discrimination in policy benefits on the basis of marital status. b) Discrimination in rates for persons within the same class. c) Discrimination in premiums for persons within the same life expectancy. d) Discrimination in policy benefits on the basis of life expectancies.

Reinstatement fees may be double the unpaid renewal fee

Which of the following is true about license reinstatement? a) To reinstate a license, a producer must pass a written examination. b) Reinstatement fees may be double the unpaid renewal fee. c) A license can only be reinstated within 6 months from the renewal date. d) Lapsed licenses cannot be reinstated.

It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age

Which of the following is true of a children's rider added to an insured's permanent life insurance policy? a) The policy covers only the natural children of the insured. b) Each child covered must show evidence of insurability. c) It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age. d) It is permanent insurance.

It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated

Which of the following statements about the reinstatement provision is true? a) It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated. b) It permits reinstatement within 10 years after a policy has lapsed. c) It provides for reinstatement of a policy regardless of the insured's health. d) It guarantees the reinstatement of a policy that has been surrendered for cash.

They can be changed only with the written consent of that beneficiary

Which of the following statements is TRUE concerning irrevocable beneficiaries? a) They can be changed only with the written consent of that beneficiary. b) They may be changed at any time. c) They can never be changed. d) They may be changed only on the anniversary date of the policy.

Standard risk is representative of the majority of people

Which of the following statements is correct about a standard risk classification in the same age group and with similar lifestyles? a) Standard risk requires extra rating. b) Standard risk is also known as high exposure risk. c) Standard risk is representative of the majority of people. d) Standard risk pays a higher premium than a substandard risk.

Buy-sell agreement

Which of the following would describe a legal document which would dictate who can buy a deceased partner's share of a business and for what amount? a) Split dollar agreement b) Buy-sell agreement c) Profit and loss agreement d) Key person agreement

The Medical Information Bureau

Which of the following would provide an underwriter with information concerning an applicant's health history? a) The Medical Information Bureau b) A medical examination c) The agent's report d) The inspection report

Option B

Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? a) Corridor option b) Variable option c) Option A d) Option B

Replacement rule

Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance? a) Replacement rule b) Reinstatement rule c) Conversion rule d) Disclosure rule

Rating the financial strength of insurance companies

Which services are associated with Standard & Poor's and AM Best? a) Storing medical information collected by insurance companies b) Rating the financial strength of insurance companies c) Investigating violations of The Fair Credit Reporting Act d) Providing employment histories for investigative consumer reports

Individual

Your client's employer does not offer a company-wide annuity contract. What type of annuity contract could your client obtain? a) Independent Group Contract b) Single c) Nonqualified d) Individual