Texas Life & Health Insurance (Quiz)

T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive?

$0 because T is still alive and the sole primary beneficiary, while the mother is still the contingent beneficiary

K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?

$20,000 Death Benefit

P purchases a $50,000 whole life insurance policy in 2005. One of the questions on the application asks if P engages in scuba diving, to which P answers "No". The policy is then issued with no scuba exclusions. In 2010, P takes up scuba diving and dies in a scuba-related accident in 2011. What will the insurer pay to P's beneficiary?

$50,000 (minus any outstanding policy loans)

A company that owns a life insurance policy on one of its key members may do all of the following 1)_________ 2)__________ 3)__________

1) Borrow against cash value 2) Change beneficiary 3) Cancel policy

Whole Life insurance policies are contractually guaranteed to provide each of the following 1)__________ 2)___________ 3)____________

1) Cash value that will ultimately replace the death benefit 2) Nonforfeiture benefit options 3) Premiums that remain fixed for the life of the policy

Three types of agent authority are 1)__________ 2)__________ 3)___________

1) Express 2) Implied 3) Apparent

Premature IRA distributions are assessed a penalty tax of:

10%

A non-contributory plan requires ____% participation of all eligible employees

100%

What is the maximum Social Security Disability benefit amount of an insured can receive?

100% of the insured's Primary Insurance Amount

An insured must notify an insurer of a medical claim within how many days after an accident?

20 Days

An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?

20% is withheld for income taxes

How long is the typical free look period for Long Term care insurance policies?

30 Days

An IRA owner can start making withdrawals and NOT be subjected to a tax penalty beginning at what age?

59 1/2

How many months may an insurer delay the payment of a cash value loan or surrender value?

6 Months

All individuals covered under a group contract will receive ______________.

A Certificate

Additional coverage can be added to a Whole Life policy by adding __________.

A Decreasing Term Rider

A statement made by an insured in an insurance application that must be true to the best of one's knowledge and which becomes a part of the contract is known as:

A Representation

A Life Insurance policyowner would like to take out a policy loan against the cash value in his Whole Life policy. The interest rate applied to this loan may vary over time. This is referred to as _____________.

A Variable Rate Cash Value Loan

To be eligible for Social Security disability benefits, an employee must be unable to perform: A) Any Occupation B) His/Her Current Occupation C) Any occupation that reflects the employee's education level D) Any occupation that the employee is qualified and willing to do

A) Any Occupation

What is considered to be a characteristic of an immediate annuity? A) Benefit payments start within one payment period of purchase B) Benefit payments start within 5 years of initial purchase C) Normally tied to a specific equity or stock index D) Periodical contributions begin immediately

A) Benefit payments start within one payment period of purchase

The situation in Which a group of physicians are salaried employees and conduct business in an HMO facility is called a(n) A) Closed panel B)Open panel C)Co-op panel D)Capitation panel

A) Closed panel

A CEO's personal assistant suffered injuries at home and as a result, was unable to work for four months. which type of policy will pay a month benefit to the personal assistant? A) Disability Income B) Major medical C) Key employee D) Business Overhead expense

A) Disability Income

In a disability income policy, which of these clauses acts as a deductible? A) Elimination Period B) Waiver period C) Deductible period D) Probationary Period

A) Elimination Period

Health insurance benefits NOT covered due to an act of war are: A) Excluded in the contract provisions B) Assigned to a reinsurer C) Given a probationary period D) Charge a higher premium

A) Excluded in the contract provisions

With acciedental Death and Dismemberment polices, what is the purpose of the Grace Period? A) Gives policyowner additional time to pay overdue premiums B) Gives the policy owner additional time to file a lawsuit C) Gives the policy owner additional time to file a claim D) Gives the policyowner additional time to provide proof of loss.

A) Gives policyowner additional time to pay overdue premiums

Which of the following provisions specifies how long a policyowner's health coverage will remain in effect if the policyowner does not pay the premium when it is due? A) Grace period B) Consideration C) Waiver of premium D) Reinstatement

A) Grace period

Bryce purchased a disability income policy with a rider that guarantees him the option of purchasing additional amounts of coverage at predetermined times without requiring to provide evidence of insurability. What kind of rider is this? A) Guaranteed insurability rider B) Additional coverage rider C) Paid-up option D) Extended insurability rider

A) Guaranteed insurability rider

Which of these retirement plans can be started by an employee, even if another plan is in existence? A) Individual Retirement Account (IRA) B) Defined Plan C) Keogh Plan D) 403B Plan

A) Individual Retirement Account (IRA)

Which of the following health insurance policy provisions specifies the health care services a policy will provide? A) Insuring clause B) Usual, Customary and reasonable clause C) Consideration clause D) Benefits clause

A) Insuring clause

K is an insured under a life insurance policy owned by a third party. Which of these statements is true? A) K has no ownership rights B) K may change the beneficiary C) K may borrow against the policy's cash value D) K may change the premium mode

A) K has no ownership rights

What is considered to be a characteristic of a conditionally renewable health insurance policy? A) Premiums may increase at time of renewal B) Premiums may increase at any time C) Policy may be renewed at the discretion of the insured D) policy may be amended by insurer at any time

A) Premiums may increase at time of renewal

What determines the full amount of Social Security retirement benefits a qualified individual is entitled to receive? A) Primary Insurance Amount (PIA) B) Total taxes paid into FICA C) Number of Dependents D) State of Residence

A) Primary Insurance Amount (PIA)

D is an architect receiving Disability Income benefits who is not able to return to work full time, but can work on a part-time basis. Which of these features would allow D to continue receiving benefits? A) Residual Benefits clause B) Waiver Benefit Clause C) Concurrent Benefit Clause D) Guaranteed benefit clause

A) Residual Benefits clause

Which type of plan allows an employer to give money to an employee for buying a life insurance policy and also permits the employee to select the beneficiary? A) Split-dollar plan B) Employer purchase plan C) Key employee Plan D) Deferred Compensation Plan

A) Split-dollar plan

A disability elimination period is best described as a A) Time deductible B) Dollar deductible C) Eligibility period D) Probation period

A) Time deductible

An employee of 20 years recently retired at age 59 1/2. This employee's group life contract can be: A) converted to an individual permanent policy at an individual rate B) converted to an individual permanent policy at a group rate C) continued at an individual rate D) continued at a group rate

A) converted to an individual permanent policy at an individual rate

Q is hospitalized for 3 days and receives a bill for $10,100. Q has a Major Medical policy with a $100 deductible and 80/20 coinsurance. How much will Q be responsible for paying on this claim? A)$2,100 B)$2,020 C)$2,000 D)$100

A)$2,100

Under a Basic Medical Expense policy, what does the hospitalization expense portion cover? A)Hospital room and board B)hospital administration expenses C)surgeon's fees D)Physician fees

A)Hospital room and board

Basic hospital and surgical policy benefits are: A)Lower than the actual expenses incurred B)Higher than the actual expenses Incurred C)Normally subject to deductibles D) Normally subject to coinsurance

A)Lower than the actual expenses incurred

The percentage of an individual's Primary Insurance Amount (PIA) determines the benefits paid in which of the following programs? A)Social Security Disability Income B)Medicare Supplements C)Medicaid D)COBRA

A)Social Security Disability Income

Which of the following costs would a basic hospital/Surgical policy likely cover? A)Surgically removing a facial birthmark B)Care given at a nursing home C)treating a wound from a soldier injured at war D)Lost income caused by a hospital stay

A)Surgically removing a facial birthmark

T was insured under an individual Disability Income policy and was severely burned in a fire. As a result, T became totally disabled. The insurer began making monthly benefit payments, but later discovered that the fire was set by T in what was described as arson. What actions will the insurer take? A)The insurer will rescind the policy, deny the claim, and recover all payments made B) Due to the policy not being post-claim underwritten, the insurer must continue to pay this claim C)claim will be rejected, but no recovery of payments will be made D) Claim will be denied, but the policy will remain in force and without further premium payments due to the insured's total disability

A)The insurer will rescind the policy, deny the claim, and recover all payments made

Medicare is intended for all of the following groups EXCEPT: A)Those enrolled as a full-time student B)Those receiving Social Security Disability for at least 24 months C)Those afflicted with chronic kidney failure D)Those 65 and older

A)Those enrolled as a full-time student

What type of policy pays a benefit if the insured goes blind?

Accidental Death & Dismemberment (AD&D)

A policyowner may generate taxable income from which of the following Dividend Options?

Accumulation at Interest

What does a Cost of Living rider give the insured?

Additional Death Benefits

A contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of ___________.

Adhesion

L takes out a life insurance policy and dies 10 years later. During the claim process, the insurer discovers that L had understated her age on the application. Under the Misstatement of Age provision, the insurer will __________________.

Adjust the death benefit to a reduced amount

How long does the coverage normally remain on a limited-pay life policy?

Age 100

The Consideration Clause in a Life Insurance Contract contains what pertinent information?

Amount of premium payments and when they are due

When a policyowner cash surrenders a Universal Life insurance policy in its early years, this may be considered a red flag for:

An Anti-Money Laundering Violation

An underwriter determines that an applicant's risk should be recategorized due to a health issue. This policy may be issued with:

An Extra Premium

Which product would best serve a retired individual looking to invest a lump-sum of money through an insurance company?

Annuity

What is the initial source of underwriting for an insurance policy?

Application containing statements from the insured

When does a Guaranteed Insurability Rider allow the insured to buy additional coverage?

At future dates specified in the contract with no evidence of insurability required

At what time must a policyowner have insurable interest on the insured in order for the life policy to be valid?

At the time of application

What is the Automatic Premium Loan designed to do?

Avoid a Policy Lapse

All are true statements regarding the underwriting process, EXCEPT: A) Signed consent from the applicant must be provided in order to test for AIDS and HIV virus B) AIDS and HIV virus exams can be conducted in a discriminatory fashion C) The cost of any examination is paid for by the insurer D) The original application is the primary source of information used in the underwriting process

B) AIDS and HIV virus exams can be conducted in a discriminatory fashion

A "reimbursment policy" pays what amount of covered Long-Term care expenses? A) All expenses regardless of the policy limits B) Actual covered expenses up to the daily maximum C) a daily dollar amount regardless of the actual incurred expenses D) The usual, customary, and reasonable expenses regardless of the policy limits

B) Actual covered expenses up to the daily maximum

Which of the following does Social Security NOT provide benefits for? A) Survivorship B) Dismemberment C) Disability D) Retirement

B) Dismemberment

Company Z has a Cross-Purchase Buy-Sell Agreement in place among its three founding partners. If the agreement is funded with individual life insurance, what would it require? A) One policy is owned and paid for by the company B) Each partner must own a policy on the other partners C) One policy is owned by the company and premiums are split equally among the partners D) each partner owns their own individual policy

B) Each partner must own a policy on the other partners

Which health policy clause stipulates that an insurance company must attach a copy of the application to the policy to ensure that it is part of the contract? A) Consideration B) Entire Contract C) Free-look D) Insuring

B) Entire Contract

Which of the following is an important underwriting principle of group life insurance? A) Physical examinations are required B) Everyone must be covered in the group C) Employer must pay for the entire premium D) The group must be formed for the purpose of getting affordable insurance

B) Everyone must be covered in the group

Which of these is NOT relevant when determining the amount of personal life insurance needed? A) Existing life insurance coverage B) Local unemployment rate C) Household income D) Household debt

B) Local unemployment rate

The Notice of Claims provision requires a policyowner to A) Provide proof of loss B) Notify an insurer of a claim C) Wait 60 days after filing a claim D) Notify their physician

B) Notify an insurer of a claim

Which of the following is TRUE if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made? A) Surrender charge is applied B) The account can be rolled into the surviving spouse's IRA C) Distributions will be received tax-free if surviving spouse is over age 59 1/2 D) Future distributions are payable to the owner's estate

B) The account can be rolled into the surviving spouse's IRA

A qualified profit-sharing plan is designed to: A) allow key employees to participate in the profits of the company B) allow employees to participate in the profits of the company C) keep key employees from leaving the company D) allow employees to elect company officers

B) allow employees to participate in the profits of the company

Medicare Part B does NOT cover A) Occupational Therapy B) inpatient hospital services C) Physician and surgeon services D) Medical equipment rental

B) inpatient hospital services

Comprehensive major medical policies usually combine: A)Disability Income Coverage B)Basic Hospital/Surgical coverage C)Basic Hospital/Surgical with accidental coverage D)Basic/Hospital/Surgical with Disability Income coverage

B)Basic Hospital/Surgical coverage

Which of the following policy features charges to the following year's deductible instead of the current year's deductible? A)Deferral provision B)Carryover provision C)Stop-Loss Provision D)Corridor Provision

B)Carryover provision

Which of the following organizations would make reimbursement payments directly to the insured individual for covered medical expenditures? A)Administrative-Services-only plan B)Commercial insurer C)Preferred Provider Organization D)Health Maintenance Organization

B)Commercial insurer

Which of the following types of organizations are prepaid group health plans. Where members pay in advance for the services of participating physicians and hospitals that have agreements? A)PPO B)HMO C)MEWA D)POS

B)HMO

The first portion of a covered Major Medical insurance expense that the insured is required to pay is called the: A)Corridor deductible B)Initial Deductible C)Stop-loss Deductible D)Coinsurance deductible

B)Initial Deductible

Which of the following is NOT a limited benefit plan? A)Dental policy B)Life insurance policy C) Critical illness policy D)Cancer policy

B)Life insurance policy

Under what system do a group of doctors and hospitals in a designated area contract with an insurer to provide services at a prearranged cost to the insured? A)HMO B)PPO C)EPO D)PLHSO

B)PPO

The individual who provides general medical care for a patient as well as referral for specialized care is known as a: A)Physician's assistant B)Primary Care Physician C)Secondary Care Physician D)Third Party Administrator

B)Primary Care Physician

Which of the following statements BEST describes dental care indemnity coverage? A)Services are reimbursed before the insurer receives the invoice B)Services are reimbursed after insurer receives the invoice C)In-network dentist must always be used D)Very limited list of providers

B)Services are reimbursed after insurer receives the invoice

Which of the following actions is required by an insured who leaves the primary area of medical coverage and seeks medical care? A)Obtain prior approval from the NAIC for the medical services B)obtain prior approval from the insurer for the medical service C)Take a physical examination prior to leaving the primary area D)Sign a liability waiver from the insurer prior to receiving medical care

B)obtain prior approval from the insurer for the medical service

T is the policyowner for a Life Insurance policy with an Irrevocable beneficiary designation. If T wishes to change the beneficiary, T must obtain permission from the ______________.

Beneficiary

P died five years later after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. What action will the insurer take?

Beneficiary will be paid the Death Benefit

S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased, EXCEPT: a) type of life insurance b) S's attained age c) dividend amount used toward the purchase d) beneficiary's age

Beneficiary's Age

P is a forty-year-old woman and would like to purchase an annuity that will provide a lifetime income stream beginning at age sixty. Which of the following did she NOT buy? A) A Straight Life Deferred Annuity B) A Straight Life Annuity C) An Immediate Annuity D) A Deferred Annuity

C) An Immediate Annuity

Which of these is NOT considered to be a cost connected with an individual's death? A) Funeral expense B) Tax liability C) Business Expenses D) Probate costs

C) Business Expenses

What type of policy would only provide coverage for specific types of illnesses (cancer, stroke, etc)? A)MEWA B)Blanket insurance C) Dread disease insurance D) Disability insurance

C) Dread disease insurance

Which of these statements is INCORRECT regarding the federal income tax treatment of life insurance? A) Premiums are normally not tax deductible B) Cash dividends are normally not taxed D) Entire cash surrender value is taxable D) Proceeds are received tax-free if there is a named beneficiary

C) Entire cash surrender value is taxable

This type of deductible provision waives the deductible for all family members after some of them have satisfied individual deductibles within the same year: A)Individual Deductible B)Corridor deductible C) Family maximum deductible D)Common accident deductible

C) Family maximum deductible

A physician opens up a new practice and qualies for a $7,000/Month disability Income policy. What rider would the physician add if he wants the ability to increase his policy benefit as his practice and income grow? A) Extended term rider B) Cost of living adjustment rider C) Guaranteed Insurability option rider D) Waiver of premium rider

C) Guaranteed Insurability option rider

W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices EXCEPT a(n): A) Flexible Premium Deferred Annuity B) Variable Annuity C) Immediate Annuity D) Straight Life Annuity

C) Immediate Annuity (start providing income payments usually starting within 30 days from the purchase date)

K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true? A) Proceeds will be paid to P's estate B) Proceeds will be divided equally between K's and Ps estate C) Proceeds will be payable to K's estate if P dies within a specified time D) The courts will decide who will receive death benefits

C) Proceeds will be payable to K's estate if P dies within a specified period of time

S recently received a $500,000 lump sum retirement buyout from her employer. She would like to buy an annuity that will immediately furnish her with a guaranteed income for life. What type of annuity is best suited for her situation? A) 403B Plan B) Deferred Premium C) Single Premium D) Period Certain

C) Single Premium

The provision in a health insurance policy that suspends premiums being paid to the insurer while the insured is disabled is called: A) Probation Period B) Grace Period C) Waiver of Premium D) Elimination Period

C) Waiver of Premium

In a qualified retirement plan, the yearly contributions to an employee's account: A) Are not tax-deductible B) Are restricted to minimum levels set by the IRS C) Are restricted to maximum levels set by the IRS D) Must be matched dollar-for-dollar by the employer

C) are restricted to maximum levels set by the IRS

A comprehensive major medical health insurance policy contains an eligible expenses provision which identifies the type of health care services that are covered. All of the following health care services are typically covered, EXCEPT for: A) hospital charges B)physician fees C)Experimental and investigative services D)Nursing Services

C)Experimental and investigative services

J is a subscriber to a plan which contracts with doctors and hospitals to provide medical benefits at a preset price. What type of plan does J belong to? A)Multiple Employer Welfare Arrangements B)Multiple employer trust C)Health Maintenance Organization D)Co-op Arrangement

C)Health Maintenance Organization

Which type of provider is known for stressing preventative medical care and routine physical examinations? A) Multiple Employer Welfare Arrangements (MEWA) B)Major medical provider C)Health Maintenance Organization(HMO) D)Preferred Provider Organizations(PPO)

C)Health Maintenance Organization(HMO)

What does Medicare Part A and B cover? A)Part A covers hospitalization: part B covers Long-term Care B)Part A covers Doctor's services: part B covers hospitalization C)Part A covers hospitalization: part B covers Doctor's services D)Part A covers Prescription Drugs: part B covers Disability

C)Part A covers hospitalization: part B covers Doctor's services

Which of the following statements is true about most Blue Cross/Blue Shield Organizations? A)They are the same as private insurance companies B)They are federally sponsored C)They are nonprofit organizations D)They are owned by hospitals and physicians

C)They are nonprofit organizations

Which of the following phrases refers to the fees charged by a healthcare professional? A)Deductible B)Coinsurance C)Usual, Customary, and Reasonable expenses D)Hospital

C)Usual, Customary, and Reasonable expenses

What type of employee welfare plans are not subject to ERISA regulations?

Church Plans

Insurance contracts are known as __________ because certain future conditions or acts must occur before any claims can be paid.

Conditional

Insurance policies are offered on a "take it or leave it" basis which make them ___________.

Contracts of Adhesion

What type of group insurance plan involves employees sharing the cost?

Contributory Plan

Which of these is NOT a reason for a business to buy key person life insurance? A) The reduction in sales as a direct result of death of the key employee B) A void in leadership if the key person were to die C) The loss of company revenues while a replacement is being sought D) A pension deficiency if the key employee dies

D) A pension deficiency if the key employee dies

The policy provision that entitles the insurer to establish conditions the insured must meet while a claim is pending is: A) Grace period B) Medical examination C) Entire contract D) Time limit on certain defenses

D) A time-limit on certain defenses

Which provision is NOT a requirement in a group life policy? A) Conversion B) Grace Period C) Incontestable Period D) Accidental (AD&D)

D) Accidental (AD&D)

All of the following statements about Major Medical benefits are true, EXCEPT: A)The deductible can be expresses as a fixed dollar amount B)The benefit period begins only after a specified amount of expenses have accrued C) Benefits are generally expressed as a percentage of eligible expenses D) Benefits have no maximum limit

D) Benefits have no maximum limit

What group term life feature permits an individual to depart from the group and continue to be covered without providing evidence of insurability? A) Entire contract B) Owner's rights C) Nonforfeiture options D) Conversion

D) Conversion

Which of the following policy provisions prohibts in insurance company from incorporating external documents into an insurance policy? A) Waiver B) Exceptions and Reductions C) Incontestable D) Entire Contract

D) Entire Contract

The type of annuity that can be purchased with one monetary deposit is called a(n): A) Single Deposit Annuity B) Single Premium Annuity C) Fixed Annuity D) Immediate Annuity

D) Immediate Annuity

In an individual retirement account (IRA), rollover contributions are: A) subject to capital gains tax B) subject to ordinary income tax C) partially limited by dollar amount D) not limited by dollar amount

D) Not limited by dollar amount

Which statements of INCORRECT regarding a Preferred Provider Organization? A)PPO's normally have more providers to chose from as compared to an HMO B)Prices are negotiated in advance for PPO providers C)In-network PPO providers offer members better coverage of incurred expenses D) PPO's are NOT a type of managed care systems

D) PPO's are NOT a type of managed care systems

Which Long term care insurance statements is true? A) Inflation protection is usually not offered B) Benefits are usually payable for alcohol rehabilitation C) Can only be offered to individuals under the age 70 D) Pre-existing conditions must be covered after the coverage has been in force for six months

D) Pre-existing conditions must be covered after the coverage has been in force for six months

Which of these factors does NOT influence an applicant's need for life insurance? A) Lifestyle of the applicant B) Number of dependents C) Future educational cost of the dependents D) Self-maintenance Expenses

D) Self-maintenance Expenses

K has inherited a large sum of money. K purchases an annuity with this sum on July 1, and starts receiving payments August 1. These payments will continue for as long as she and her spouse live. Which type of annuity did K purchase? A) Single Premium Deferred Annuity with Period Certain B) Flexible Premium with Survivor Annuity C) Flexible Premium with Period Certain D) Single Premium Immediate Joint with Survivor Annuity

D) Single Premium Immediate Joint with Survivor Annuity

An individual Disability Income insurance applicant may be required to submit all of the following information EXCEPT: A) Medical history B) Gross income C) Occupation D) Spouse's Occupation

D) Spouse's Occupation

Under a Long Term Care policy, which benefit would be typically excluded or limited? A) Intermediate nursing B) Skilled nursing C) Home health cares D) alcohol rehabilitation

D) alcohol rehabilitation

This type of deductible provision states that should more than one family member be involved in a common accident, or suffer the same illness, only one individual deductible amount shall be applied. A)Individual deductible B)Corridor Deductiblee C)Family maximum deductible D)Common accident Deductible

D)Common accident Deductible

T was treated for an ailment 2 months prior to applying for a health insurance policy. This condition was noted on the application and the policy was issued shortly afterwards.How will the insurer likely consider this condition? A)Insurer will require a higher deductible for any claims resulting from this condition B)Insurer is required to initially cover this pre-existing condition C)insurer will permanently exclude the condition from the policy D)Insurer will likely treat as a pre-existing condition which may not be covered for one year

D)Insurer will likely treat as a pre-existing condition which may not be covered for one year

Which of the following BEST describes how a Preferred Provider Organization (PPO) is less restrictive than a Health Maintenance Organization (HMO)? A)Typically not subject to deductibles B)Not regulated by the federal government C)More Benefits Available D)More physicians to choose from

D)More physicians to choose from

Dividends payable to a policyowner are ___________.

Declared by the Insurance Company

What type of life policy has a death benefit that adjusts periodically and is written for a specific period of time?

Decreasing Term

F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed?

Decreasing Term Policy

P, age 50, purchased an annuity that P will fund with $500/ month for 15 years. The annuity will then pay P retirement payments after the 15 years. Which type of annuity did P purchase?

Deferred Annuity

A 45 year-old woman won $100,000 in a scratch-off lottery ticket. She purchased an annuity that will pay her $1,500 per month beginning at age 60. Which annuity did this woman purchase?

Deferred Fixed Annuity

In a Participating Insurance Policy, Policyowners are entitled to receive ______________.

Dividends

Under a trustee group life policy, who would be eligible for a certificate of coverage?

Employee

N is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event N was killed while flying as a student pilot?

Exclusion

When an insurer issues a policy that refuses to cover certain risks, this is referred to as an ______________.

Exclusion

The sections of an insurance contract which limit coverage are called

Exclusions

Which nonforfeiture option offers the highest death benefit?

Extended Term

D owns a Whole Life policy that was purchased 10 years ago. If the premium payments suddenly stop and D takes no additional action, which Nonforfeiture Option will the insurer likely proceed with?

Extended Term (allows the policyowner to use the cash value to purchase a term insurance policy with a death benefit equal to that of the original whole life policy)

E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Although E was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E's life insurance policy be directed to?

F (insurable interest only needs to exist at the time of application)

What does a Face Amount Plus Cash Value Policy supposed to pay at the insured's death?

Face amount plus the policy's cash value

P has recently signed an application for insurance. The insurer MUST advise her in writing that an investigative consumer report may be conducted according to the:

Fair Credit Reporting Act

What is the name of the law that requires insurers to disclose information-gathering practices and where the information was obtained?

Fair Credit Reporting Act

True or False: A Nonforfeiture Clause gives the policyowner cost of living allowances.

False

True or False: A Nonforfeiture Clause gives the policyowner lifetime income.

False

True or False: A Nonforfeiture Clause gives the policyowner unemployment benefits.

False

True or False: A Whole Life Insurance policyowner has the right to change the grace period.

False

True or False: Dividends from a life insurance policy are guarenteed.

False

True or False: Dividends from a life insurance policy are taxable.

False

True or False: In order to Reinstate a lapsed policy, one forfeits the right to use the automatic loan provision upon reinstatement.

False

True or False: Regarding a Guaranteed Insurability Option rider, evidence of insurability IS required when the option is exercised.

False

True or False: Regarding a policy's grace period, past-due premiums are waived.

False

True or False: Regarding the Waiver or premium Provision, the insured must be eligible for Social Security disability for their claim to be accepted.

False

True or False: Surrender charges in a life policy with a rear-end loaded provision are deducted from the death benefit.

False

True or False: Surrender charges in a life policy with a rear-end loaded provision are deducted from the policy's cash value.

False

True or False: The Misstatement of Age provision states an Insurer may void the policy if a misstatement of age is discovered.

False

True or False: The full face amount of a policy is available as an Accelerated Death Benefit.

False

True or False: Those on Social Security Disability automatically qualify for Accelerated Death Benefits.

False

True or False: The Misstatement of Age provision is only valid during the contestable period.

False (the insurer may adjust the coverage to reflect the insured's true age at any time if a misstatement is discovered)

True or False: In Variable Life Policies, the insurer assumes the investment risk.

False - The policyowner bears the investment risk in Variable Life Policies

What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years?

Family Maintenance Policy

N, age 50, recently bought an annuity that will pay a guaranteed $2,000/month at age 70 for life. What type of annuity did N purchase?

Fixed Deferred (pays out a fixed amount for life starting at a future date)

A nonprofit incorporated society that does not have capital stock and operates for the sole benefit of its members is known as _____________.

Fraternal Benefit Society

An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?

Full face amount minus any past due premiums

A policy where the premium increases each year during the early years of the contract and remains the same after that time as known as a ____________.

Graded Premium Whole Life Policy

Which requirement must be met for an association to be eligible for a group life plan?

Group was formed for a purpose other than acquiring insurance

When must insurable interest exist for a life insurance contract to be valid?

Inception of the contract

A life insurance policy would be considered a wagering contract WITHOUT __________.

Insurable Interest

When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have ___________.

Insurable Interest in the proposed Insured

What is being delivered during a policy delivery?

Insurance Contract to the Proposed Insured

What need is satisfied by Adjustable Life Insurance?

Insured's need for flexible premiums

The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death is called a(n) ____________.

Insuring Agreement

In a life insurance contract, an insurance company's promise to pay stated benefits is called the _____________.

Insuring Clause

B receives yearly dividends and interest from a participating life insurance policy. Which of these should B include as gross income for federal income tax purposes?

Interest Only

The only settlement option that does NOT involve the systematic liquidation of the death proceeds in the event of the insured's death is _________________.

Interest Only

B receives yearly dividends and interest from a participating life insurance policy. What should B include as gross income for federal income tax purposes?

Interest Only (Dividends are not taxable)

How are policyowner dividends treated in regard to income tax?

Interest on accumulations is taxed

What arrangement allows one to bypass insurable interest laws?

Investor-Originated Life Insurance

A life insurance arrangement which circumvents insurable interest statutes as called _____________.

Investor-Originated Life Insurance (IOLI)

What is the purpose of a Policy Summary?

It highlights the critical parts of the policy issued and describes the coverages, riders and exclusions

On January 8, an applicant filled out an application for a life insurance policy but did not include the initial premium. The insurance company approved the application on January 14 and issued the policy on January 15. The producer delivered the policy on January 26 and collected the first premium. When did the coverage become effective?

January 26 - In this situation, coverage became effective on the date the policy was delivered and the first premium collected.

Stranger Originated Life Insurance (STOLI) has been found to be in violation of what contractual element?

Legal Purpose (Insurable Interest)

T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this?

Life Annuity with Period Certain

A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid:

Mandatory Income Tax Withholding on the Transfer Amount

P and Q are married and have three children. P is the primary beneficiary on Q's Accidental Death and Dismemberment (AD&D) policy and Q's sister R is the contingent beneficiary. P, Q, and R are involved in a car accident and Q and R are killed instantly. The Accidental Death benefits will be paid to:

P only

K owns a Whole Life policy. If K wants an increasing Death Benefit to protect against inflation, which Dividend Option should she chose?

Paid-Up Additional Insurance

When a policy pays dividends to its policyholders, it is said to be ____________.

Participating

Which of the following provisions guarantees that premiums will be waived if a Juvenile Life policyowner becomes disabled?

Payor Clause

A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the ________________.

Policy Loan Provision

Who elects the governing body of a mutual insurance company?

Policyholders

Who benefits in Investor-Originated Life Insurance (IOLI) when the insured dies?

Policyowner

Who has the right to change a revocable beneficiary?

Policyowner

What is the consideration given by an insurer in the Consideration clause of a life policy?

Promise to pay a death benefit to a named beneficiary

Which nonforfeiture option continues a build-up of cash value?

Reduced Paid-Up

The provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called: A) Reinstatement B) Grace Period

Reinstatement

Which of these provisions require proof of insurability after a policy has lapsed?

Reinstatement

T is covered by an Accidental Death and Dismemberment (AD&D) policy that has an irrevocable beneficiary. What action will the insurance company take if T requests a change of beneficiary?

Request of the change will be refused. An irrevocable designation may not be changed without the written consent of the beneficiary.

The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called _____________.

Reserves

A(n) __________ beneficiary may be changed by the policyowner WITHOUT the consent of the beneficiary.

Revocable

J would like to maintain the right to change beneficiaries. Which beneficiary designation should be used?

Revocable

M purchased an Accidental Death and Dismemberment (AD&D) policy and named his son as beneficiary. M has the right to change the beneficiary designation at anytime. What type of beneficiary is his son?

Revocable

What is the term used to define an underwriter's assessment of information on a life insurance application?

Risk Classification

Typically a life insurance death benefit is paid by a lump-sum payment. A(n) __________ option is a method of distributing a Life Insurance policy's death benefit OTHER than by a lump sum payment.

Settlement

What is Old Age and Survivors Health Insurance (OASDHI) also known as?

Social Security

What kind of life insurance product covers children under their parent's policy?

Term Rider

What type of rider may be used to include coverage for children under their parent's life insurance policy?

Term Rider

C is trying to determine whether to convert her convertible term life policy to whole life insurance using her original age or attained age. What factor would affect her decision the most?

The Cost

The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured original age is ____________.

The Cost

A policy of adhesion can only be modified by whom?

The Insurance Company

What is the underlying concept regarding level premiums?

The early years are charged more than what is needed

A noncontributory group term life plan is characterized by:

The entire cost of the plan is paid for by the employer

What is a contingent beneficiary?

The person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured

On a life insurance policy, who is qualified to change the beneficiary designation?

The policyowner

What action should a producer take when submitting an insurance application to an insurer?

They should inform insurer of relevant information not included on the application

Why is an applicant's signature required on a life insurance application?

To attest that the statements on the application are accurate to the best of the applicant's knowledge

True or False: 20-Pay Life accumulates faster than Straight life.

True

True or False: A Nonforfeiture Clause gives the policyowner guaranteed values even if the policy has lapsed.

True

True or False: A Variable Insurance Policy does NOT guarantee a return on its investment accounts

True

True or False: A Whole Life Insurance policyowner has the right to assign the policy to someone else.

True

True or False: A Whole Life Insurance policyowner has the right to designate a beneficiary.

True

True or False: A Whole Life Insurance policyowner has the right to take out a policy loan.

True

True or False: Dividends from a life insurance policy are issued by the Insurer.

True

True or False: In Whole Life Policies, premiums are payable throughout the insured's lifetime & coverage lasts until the death of the insured

True

True or False: In order to Reinstate a lapsed policy, one must pay back interest and premiums.

True

True or False: In order to Reinstate a lapsed policy, one must provide evidence of insurability.

True

True or False: In order to Reinstate a lapsed policy, one must reinstate within a stated period.

True

True or False: One MUST have a terminal illness to qualify for an Accelerated Death Benefit.

True

True or False: Regarding a Guaranteed Insurability Option rider, coverage can be added at specific events such as marriage, having a child or at a certain age.

True

True or False: Regarding a Guaranteed Insurability Option rider, evidence of insurability is NOT required when the option is exercised.

True

True or False: Regarding a policy's grace period, full coverage continues.

True

True or False: Regarding a policy's grace period, policy loans may still be made.

True

True or False: Regarding a policy's grace period, the grace period terms are stated in the policy.

True

True or False: Regarding the Waiver or premium Provision, a waiting period must pass before one becomes eligible for benefits.

True

True or False: Regarding the Waiver or premium Provision, it is available on both permanent and term insurance policies.

True

True or False: Regarding the Waiver or premium Provision, the insured must be totally disabled to qualify.

True

True or False: Surrender charges in a life policy with a rear-end loaded provision are deducted when the policy is discontinued.

True

True or False: The Misstatement of Age provision states an adjustment be made in the amount of insurance if the age of the insured is misstated.

True

True or False: Variable Life Policies have a fixed, level premium

True

What is considered an element of a Variable Life Policy?

Underlying Equity Investment

In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?

Unilateral

What type of life insurance incorporates flexible premiums and an adjustable death benefit?

Universal Life

Which type of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?

Variable Life

Which type of policy contains a monthly mortality charge as well as self-directed investment choices?

Variable Universal Life

A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?

Waiver of Premium Rider

An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?

When the conditions of the receipt are met

When is the face amount of a Whole Life policy paid?

When the insured dies or at the policy's maturity date (whichever happens first)

A life insurance policy that provides a policyowner with cash value along with a level face amount is called __________.

Whole Life Insurance

Which statement regarding third-party ownership of a life insurance policy is true? A) Beneficiary is required to be irrevocable B) Policy cannot be assigned once issued C) It is illegal in most states D) It is used extensively in estate planning as well as business circumstances

d) It is used extensively in estate-planning as well as business circumstances

What is the purpose of the USA Patriot Act?

detect and deter terrorism

Quarterly premium payments increase the annual cost of insurance because

interest to the insurer is decreased while the administrative costs are increased

____________ is NOT considered to be an element of an insurance contract

negotiating

The advantage of reinstating an original life policy is that ___________.

premiums are based on a younger age

What factor affects the amount of monthly disability benefits payable under Social Security?

the amount of benefits available from other sources