State license test
Which of the following must an agent receive in order to sell variable life insurance policies? a) Variable products license b) Certificate of authority c) SEC registration d) FINRA registration
A
Which of the following statements is TRUE about a policy assignment? a) It transfers rights of ownership from the owner to another person. b) It is the same as a beneficiary designation. c) It permits the beneficiary to designate the person to receive the benefits. d) It authorizes an agent to modify the policy.
A
A Return of Premium term life policy is written as what type of term coverage? a) Decreasing b) Renewable c) Level d) Increasing
D
A life insurance policy can be delivered by all of the following means, EXCEPT a) First class mail with a delivery receipt. b) Personal delivery by a trained employee of the insurer, with a delivery receipt. c) Certified mail. d) Priority mail.
D
An agent is a legal person who acts on behalf of a) The principal. b) The applicant. c) The beneficiary. d) Himself/herself.
A
Which of the following is true regarding a policy with a face value less than $10,000? a) If it's returned during the free look period, the contract will be cancelled, but the insurer will retain the premium paid. b) The policy can be cancelled with full refund of premium at any time. c) If it's returned during the free look period, the agreement will be void. d) An insured cannot return the policy.
C
Which two terms are associated directly with the premium? a) Term or permanent b) Renewable or convertible c) Level or flexible d) Fixed or variable
C
Which two terms are associated directly with the way an annuity is funded? a) Immediate or deferred b) Renewable or convertible c) Single payment or periodic payments d) Increasing or decreasing
C
Installing deadbolt locks on the doors of a home is an example of which method of handling risk? a) Avoidance b) Transfer c) Self-insurance d) Reduction
D
An investor buys a life policy on an elderly person in order to sell it for a life settlement. This is an example of a) A STOLI policy. b) A prearranged funeral plan. c) A viatical settlement. d) Third-party ownership.
A
Every long-term care insurer in California must submit to the Commissioner a list of all agents or other insurer representatives authorized to solicit individual consumers for the sale of long-term care insurance. These submitted agent lists must be updated at least a) Monthly b) Quarterly c) Annually d) Semiannually
A
Harry has just received his life insurance policy. In reviewing the title page, Harry was able to ascertain the following information EXCEPT a) His spouse had been assigned the primary beneficiary. b) His children have been covered by a child rider. c) He had purchased a 20 year renewable term insurance policy in the face amount of $150,000. d) His total annual premium amount.
A
If a life insurance policy increases significantly in face amount (death benefit) when the insured reaches a specified age, what type of policy is this? a) Jumping juvenile policy b) Limited pay whole life policy c) Modified life insurance policy d) Single premium policy
A
One of the advantages of a family life insurance policy that provides coverage for children is that it a) Allows the spouse extra coverage for every child covered. b) Allows any income the children make to be included in coverage. c) May be converted to permanent insurance for the children without requiring evidence of insurability. d) Covers children for free.
A
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
A
The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose? a) Fixed amount option b) Interest only option c) Life income with period certain d) Joint and survivor
A
Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits? a) Variable period b) Variable amount c) Fixed period d) Fixed amount
A
What is the term for a sales campaign conducted through the mail? a) Direct-mail b) Mass marketing c) Advertising d) Direct-response
A
Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost? a) Indemnity b) Stop-loss c) Consideration d) Reasonable expectations
A
A father purchases a life insurance policy on his teenage daughter and adds the Payor Benefit rider. In which of the following scenarios will the rider waive the payment of premium? a) If the daughter is disabled for any length of time b) If the father is disabled for more than 6 months c) If the father is disabled for at least a year d) If the daughter is disabled for more than 3 months
C
All of the following are true regarding the guaranteed insurability rider EXCEPT a) The insured may purchase additional coverage at the attained age. b) The insured may purchase additional insurance up to the amount specified in the base policy. c) It allows the insured to purchase additional amounts of insurance without proving insurability only at specified dates or events. d) This rider is available to all insureds with no additional premium.
C
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.
C
An insured had paid only part of her total number of IRA premiums before she died. What effect will this have on the insured's estate? a) Any IRA funds will be directed to the state. b) IRAs have no effect on estates. c) Premiums left unpaid will be deducted from the estate. d) Only the premiums paid will be included in the estate.
C
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? a) $20,000 b) $25,000 c) $50,000 d) The face amount will be determined by the insurer.
C
An intentional or unintentional concealment entitles the affected party to which of the following? a) Estoppel. b) Waiver of concealed conditions. c) Subrogation of a contract. d) Rescission of a contract.
C
Any insurance agent who commits a repeated violation of the Insurance Code with respect to insurance replacement will be liable for a) A criminal penalty of up to $10,000. b) A penalty not to exceed $1,000 per violation. c) An administrative penalty of no less than $5,000 and no more than $50,000 per violation. d) An administrative penalty of no less than $30,000 and have his/her license revoked.
C
Any insurance agent who commits a repeated violation of the Insurance Code with respect to insurance replacement will be liable for a) A criminal penalty of up to $10,000. b) A penalty not to exceed $1,000 per violation. c) An administrative penalty of no less than $5,000 and no more than $50,000 per violation. d) An administrative penalty of no less than $30,000 and have his/her license revoked.
C
How are contributions to a tax-sheltered annuity treated with regards to taxation? a) They are taxed as income for the employee. b) They are taxed as income for the employee, but are tax free upon withdrawal. c) They are not included as income for the employee, but are taxable upon distribution. d) They are never taxed.
C
If a life insurance policy develops cash value faster than a seven-pay whole life contract, it is a) A Multiplicative Policy. b) A Modified Endowment Contract. c) An Accelerated policy. d) An endowment.
C
If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered to be a) Qualified. b) Approved. c) Authorized. d) Certified.
C
If the information is used only for identification and not for underwriting purposes, which of the following information about the applicant may be listed on a life insurance application? a) Mother's maiden name b) Name, age, height, and weight c) Birthplace d)
C
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.
C
Stranger-originated life insurance policies are in direct opposition to the principle of a) Insurable interest. b) Law of large numbers. c) Good faith. d) Indemnity.
C
The paid-up addition option uses the dividend a) To reduce the next year's premium. b) To accumulate additional savings for retirement. c) To purchase a smaller amount of the same type of insurance as the original policy. d) To purchase a one-year term insurance in the amount of the cash value.
C
To which of the following situations does the Replacement Regulation apply? a) Credit life insurance b) Converting an existing policy with the same insurer c) Whole life insurance d) Group annuities
C
What is a definition of a unilateral contract? a) One author: the company wrote the contract; the insured must accept it as written. b) If one party makes a condition, the other party can counteroffer. c) One-sided: only one party makes an enforceable promise d) Two or more parties go into a contract understanding there may be an unequal exchange of value
C
When an annuity is written, whose life expectancy is taken into account? a) Beneficiary b) Life expectancy is not a factor when writing an annuity. c) Owner d) Annuitant
C
Which of the following is TRUE for both equity indexed annuities and fixed annuities? a) Both are considered to be more risky than variable annuities. b) They invest on a conservative basis. c) They have a guaranteed minimum interest rate. d) They are both tied to an equity index.
C
Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation? a) Blackout approach b) Lump-sum approach c) Human life value approach d) Needs approach
C
Which of the following persons represents several insurance companies but owns the records of the policies sold? a) General agent b) Direct writing agent c) Independent agent d) Exclusive agent
C
Any insurance agent who engages in the insurance business and violates the Code with respect to insurance replacement shall on the first violation a) Be fined a sum of $10,000. b) Be administratively suspended from licensing for a period of 180 days. c) Be fined a sum of $5,000. d) Be fined a sum of $1,000.
D
During the grace period, the policyowner can a) Return the policy to the insurer for a full refund. b) Add riders to the existing policy. c) Renew the policy without proof of insurability. d) Pay a late premium without penalty.
D
If found material for underwriting, a misrepresentation a) Does not affect either of the parties. b) Must have been in writing to affect a contract. c) Can void a contract. d) May be withdrawn.
D
Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement? a) Term insurance only b) Permanent insurance only c) Universal life insurance only d) Any form of life insurance
D
The term "illustration" in a life insurance policy refers to a) A depiction of policy benefits and guarantees. b) Pictures accompanying a policy. c) Charts and graphs. d) A presentation of nonguaranteed elements of a policy.
D
To achieve the profitable distribution of exposures, a) The most coverage goes to average risks and preferred risks, while less goes to poor risks. b) Poor risks and average risks make up the majority of coverage. c) A majority of coverage goes to preferred risks. d) Preferred risks and poor risks are balanced, with average risks in the middle.
D
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
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? a) Policy Summary b) Illustrations c) Buyer's Guide d) Insurance Index
A
Which of the following is another term for the accumulation period of an annuity? a) Premium period b) Liquidation period c) Annuity period d) Pay-in period
A
Which of the following types of insurance policies would perform the function of cash accumulation? a) Credit life b) Increasing term c) Whole life d) Term life
A
All of the following are examples of risk retention EXCEPT a) Self-insurance. b) Premiums. c) Deductibles. d) Copayments
B
Which of the following statements best describes the effect the Accelerated Benefit provision would have on the benefits paid to the beneficiary? a) It will reduce the benefits by 70%. b) It will increase the benefits paid to the beneficiary. c) It will decrease the benefits paid to the beneficiary. d) It will not affect the benefits paid to the beneficiary
B
Which of the following would qualify as an implied warranty in an insurance contract? a) Statements in the policy b) An oral representation by the applicant c) The applicant's signature d) Contract's legal purpose
B
A contract between an insured and an insurance company which agrees to pay the insured for loss caused by specific events is a) A rider. b) A premium. c) A guaranteed benefit. d) A policy.
C
Which nonforfeiture option provides coverage for the longest period of time? a) Paid-up option b) Accumulated at interest c) Reduced paid-up d) Extended term
C
A small hardware store owner is involved in a car accident that renders him totally disabled for half a year. Which type of insurance would help him pay for expenses of the company during the time of his disability? a) Key-person insurance b) Disability buy-sell agreement c) Business disability policy d) Business overhead expense policy
D
Acting as an agent for a nonadmitted insurer (unless a surplus line broker) is considered a/an a) Class A violation. b) Unfair trade practice. c) Misdemeanor. d) Felony.
D
All of the following are features and requirements of the Living Needs Rider EXCEPT a) It is usually available at no additional charge. b) The remainder of the policy proceeds is payable to the beneficiary at the insured's death. c) It provides funds for medical and nursing home expenses to a terminally ill insured. d) Diagnosis must indicate that death is expected within 3 years.
D
All of the following are true regarding a decreasing term policy EXCEPT a) It has a lower premium than level term. b) The contract pays only in the event of death during the term and there is no cash value. c) The face amount steadily declines throughout the duration of the contract. d) The payable premium amount steadily declines throughout the duration of the contract.
D
All of the following entities regulate variable life policies EXCEPT a) The Insurance Department. b) The Guaranty Association. c) Federal government. d) The SEC.
D
Which of the following is NOT true regarding Equity Indexed Annuities? a) The insurance company keeps a percentage of the returns. b) They have guaranteed minimum interest rates. c) They are less risky than variable annuities. d) They earn lower interest rates than fixed annuities.
D
Which of the following would be the beneficiary in credit life insurance? a) Insured b) Company c) Borrower d) Creditor
D
Which of the following best describes fixed-period settlement option? a) Only the principal amount will be paid out within a specified period of time. b) The death benefit must be paid out in a lump sum within a certain time period. c) Income is guaranteed for the life of the beneficiary. d) Both the principal and interest will be liquidated over a selected period of time.
A
Which of the following individuals must have insurable interest in the insured? a) Producer b) Policyowner c) Beneficiary d) Actuary
A
Which of the following insurance options would be considered a risk-sharing arrangement? a) Reciprocal b) Stock c) Mutual d) Surplus lines
A
Which of the following is INCORRECT concerning a noncontributory group plan? a) The employees receive individual policies. b) They help to reduce adverse selection against the insurer. c) They require 100% employee participation. d) The employer pays 100% of the premiums.
A
Which of the following is NOT required on an illustration used in the sale of a life insurance policy? a) Underwriting or rating classification upon which the illustration is based b) The name of the primary and secondary beneficiaries c) Generic name of policy d) Name of insurer
A
Which of the following is TRUE about credit life insurance? a) Creditor is the policyowner. b) Debtor is the annuitant. c) Creditor is the insured. d) Debtor is the policy beneficiary.
A
All of the following are personal uses of life insurance EXCEPT a) Cash accumulation. b) Buy-sell agreement. c) Survivor protection. d) Estate creation.
B
All of the following are requirements of eligibility for Social Security disability income benefits EXCEPT a) Fully insured status. b) Waiting period of 5 months. c) Being age 65. d) Inability to perform any gainful work.
B
All of the following are true about variable products EXCEPT a) Policyowners bear the investment risk. b) The premiums are invested in the insurer's general account. c) The minimum death benefit is guaranteed. d) The cash value is not guaranteed.
B
All of the following are true about variable products EXCEPT a) Policyowners bear the investment risk. b) The premiums are invested in the insurer's general account. c) The minimum death benefit is guaranteed. d) The cash value is not guaranteed.
B
All of the following must be specified in an insurance policy EXCEPT a) The period during which the insurance is in force b) The financial rating of the insurer c) The parties between whom the contract is made d) The risks insured against
B
All of the following statements are true of a nonqualified retirement plan EXCEPT a) Contributions grow tax deferred. b) They do not qualify for special tax treatment by the IRS. c) Contributions are tax exempt. d) Increases of funds are not taxed until received.
B
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
B
An insured pays an annual premium to his insurer. In return, the insurer promises to pay benefits in accordance with the terms of the contract. This is called a) Consideration. b) Conditions. c) Utmost good faith. d) Acceptance.
B
In order for the California Insurance Code to be changed in any way, what is required? a) The state senators vote on any bills and if they are approved, they become law. b) A bill must be approved by both houses of the California legislature. c) A bill must be presented to the residents of California who decide by popular vote. d) The governor's signature is required on the bill.
B
In terms of parties to a contract, which of the following does NOT describe a competent party? a) The person must not be under the influence of drugs or alcohol. b) The person must be of legal age. c) The person must be mentally competent to understand the contract. d) The person must have at least completed secondary education.
B
The legal definition of "person" would NOT include which of the following? a) A business entity b) A corporation c) A family d) An individual human being
B
The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change? a) The death benefit can be increased only by exchanging the existing policy for a new one. b) The death benefit can be increased by providing evidence of insurability. c) The death benefit cannot be increased. d) The death benefit can be increased only when the policy has developed a cash value.
B
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.
B
Which of the following is NOT a legitimate use of annuities by businesses? a) Providing an investment vehicle b) Creating a tax shelter c) Funding employee retirement plans d) Providing deferred compensation for employees
B
Which of the following is true regarding a single life settlement option? a) Payments continue until the entire principal is exhausted. b) Proceeds are paid out in a lump sum. c) It provides income for a specified period of time. d) It provides income the beneficiary cannot outlive.
B
Which of the following is true regarding the insurance amount in a credit life policy? a) Creditor may insure the debtor for an unlimited amount of coverage. b) Allowable amount of coverage is determined by the State Insurance Commissioner. c) The amount of coverage can be greater than the amount owed. d) Creditor can only insure the debtor for the amount owed.
B
Which nonforfeiture option has the highest amount of insurance protection? a) Conversion b) Decreasing Term c) Reduced Paid-up d) Extended Term
C
Which of the following entities or individuals evaluates requests for payment by insureds after a loss has occurred? a) Underwriter b) Insured c) Claims department d) Marketing department
C
Which of the following would be covered by contract law? a) Neighbors suing each other for trespassing. b) An employer suing an employee for spreading damaging rumors. c) An insured suing the insurer for failure to provide promised benefits. d) A consumer suing the manufacturer for a defective product.
C
An employee will be taxed on the cost of group life insurance paid by the employer if the amount of coverage exceeds a) $10,000. b) $15,000. c) $25,000. d) $50,000
D
Any insurance agent who engages in the insurance business and violates the Code with respect to insurance replacement shall on the first violation a) Be fined a sum of $10,000. b) Be administratively suspended from licensing for a period of 180 days. c) Be fined a sum of $5,000. d) Be fined a sum of $1,000.
D
What is the benefit of choosing extended term as a nonforfeiture option? a) It can be converted to a fixed annuity. b) It has the highest amount of insurance protection. c) It matures at age 100. d) It allows for coverage to continue beyond maturity date.
D
What is the term used when a person sells his assets as a way to gain money? a) Commerce b) Transfer c) Liquidation d) Buy-Sell
D
What method is used to determine the taxable portion of each annuity payment? a) The excise ratio b) The annuity to age ratio c) The marginal tax formula d) The exclusion ratio
D
Which of the following are NOT fundable by annuities? a) Cash accumulation for any reason b) A person's retirement c) Estate liquidation d) Death benefits
D
Which of the following best describes fixed-period settlement option? a) Only the principal amount will be paid out within a specified period of time. b) The death benefit must be paid out in a lump sum within a certain time period. c) Income is guaranteed for the life of the beneficiary. d) Both the principal and interest will be liquidated over a selected period of time.
D
Which of the following is NOT an example of insurable interest? a) Child in parent b) Debtor in creditor c) Business partners in each other d) Employer in employee
D
Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insureds' death? a) The wife of the deceased insured b) The former wife of the deceased insured c) A minor son of the insured d) A business partner of the insured
D
