Wrong answers life insurance 1

94. In Ohio, a temporary license may be issued for any of the following reasons EXCEPT (Choose from the following options) 1. Agent's disability. 2. Agent's military service. 3. Agent's retirement. 4. Agent's death.

4 A temporary license is not available for an agent's retirement.

62. Which of the following best describes gross annual premium? (Choose from the following options) 1. Annual loading 2. Basic insurance rate plus commissions 3. Expense premium 4. Net premium plus expenses

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12. Who can make a fully deductible contribution to a traditional IRA? (Choose from the following options) 1. Anybody; all IRA contributions are fully deductible regardless of income level 2. Someone making contributions to an educational IRA 3. A person whose contributions are funded by a return on investment 4. An individual not covered by an employer-sponsored plan who has earned income

4 Individuals who are not covered by an employer-sponsored plan may deduct the amount of their IRA contributions regardless of their income level.

100. What is the waiting period for rate filing before each rate may become effective? (Choose from the following options) 1. 14 days 2. 30 days 3. 45 days 4. 90 days

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56. What is the main purpose of the Seven-pay Test? (Choose from the following options) 1. It requires level premium payments for 7 years. 2. It ensures that the policy benefits are paid out in 7 years. 3. It guarantees the minimum interest. 4. It determines if the insurance policy is a MEC.

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18. Which of the following is NOT considered a misrepresentation as it pertains to unfair trade practices? (Choose from the following options) 1. Making comparisons between different policies 2. Stating that the insurance policy is a share of stock 3. Exaggerating the benefits provided in the policy 4. Stating that the competitors will arbitrarily increase their premiums each year

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40. The term "illustration" in a life insurance policy refers to (Choose from the following options) 1. A presentation of nonguaranteed elements of a policy. 2. A depiction of policy benefits and guarantees. 3. Pictures accompanying a policy. 4. Charts and graphs.

1 The term "illustration" means a presentation or depiction that includes nonguaranteed elements of a policy of individual or group life insurance over a period of years.

44. Which of the following describes the taxation of an annuity when money is withdrawn during the accumulation phase? (Choose from the following options) 1. Withdrawn amounts are taxed on a last in, first out basis. 2. Withdrawn amounts are taxed on a first in, last out basis. 3. Taxes are deferred on withdrawn amounts, but a flat penalty is charged. 4. Taxes are deferred on withdrawn amounts.

1 When money is withdrawn from the annuity during the accumulation phase the amounts are taxed on a last in first out basis (LIFO). Therefore, all withdrawals will be taxable until the owner's cost basis is reached. After all of the interest is received and taxed the principal will be received with no additional tax consequences.

73. Which of the following authorities is responsible for assessing the financial ability of insurers? (Choose from the following options) 1. Superintendent 2. Financial Industry Regulatory Authority 3. National Association of Insurance Commissioners 4. Guaranty Association

1 The Ohio Insurance Department is headed by the Superintendent of Insurance, who is empowered to make and enforce rules and regulations that implement the insurance laws of Ohio. Among these responsibilities is making sure that insurers are financially stable.

86. Which statement is NOT true regarding a Straight Life policy? (Choose from the following options) 1. It has the lowest annual premium of the three types of Whole Life policies. 2. Its premium steadily decreases over time, in response to its growing cash value. 3. The face value of the policy is paid to the insured at age 100. 4. It usually develops cash value by the end of the third policy year.

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77. Which of the following is the best reason to purchase life insurance rather than annuities? (Choose from the following options) 1. To liquidate a sum of money over a period of years 2. To create regular income payments 3. To liquidate a sum of money over a lifetime 4. To create an estate

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22. Which of the following statements about group life is correct? (Choose from the following options) 1. The cost of coverage is based on the ratio of men and women in the group. 2. The premiums are higher than in an individual policy because there is no medical exam. 3. The group sponsor receives a Certificate of Insurance. 4. The policy can be converted to an individual term insurance policy.

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23. The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called (Choose from the following options) 1. Waiver of premium. 2. Guaranteed insurability. 3. Waiver of cost of insurance. 4. Payor benefit.

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42. At age 30, an applicant wants to start an insurance program, but realizing that his insurance needs will likely change, he wants a policy that can be modified to accommodate those changes as they occur. Which of the following policies would most likely fit his needs? (Choose from the following options) 1. Adjustable Life 2. Single Premium Whole Life 3. Interest-sensitive Whole Life 4. Decreasing Term

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45. An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer? (Choose from the following options) 1. $10,000, no tax consequence 2. $8,000, no tax consequence 3. $8,000, tax on growth only 4. $10,000, tax on growth only

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63. Which is true about a spouse term rider? (Choose from the following options) 1. The rider is usually level term insurance. 2. Coverage is allowed for an unlimited time. 3. The rider is decreasing term insurance. 4. Coverage is allowed up to age 75.

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64. Which of the following will NOT be an appropriate use of a deferred annuity? (Choose from the following options) 1. Creating an estate 2. Accumulating retirement funds 3. Accumulating funds in an IRA 4. Funding a child's college education

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87. When a fixed annuity owner pays pays a monthly annuity premium to the insurance company, where is this money placed? (Choose from the following options) 1. The insurance company's general account 2. Forwarded to an investor 3. Each contract's separate account 4. The annuity owner's account

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88. What limits the amount that a policyowner may borrow from a whole life insurance policy? (Choose from the following options) 1. Cash value 2. Premiums paid 3. Amount stated in the policy 4. Face amount

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92. When calculating the amount a policyowner may borrow from a variable life policy, what must be subtracted from the policy's cash value? (Choose from the following options) 1. Outstanding loans and interest 2. The face amount 3. Mortality costs 4. The cash surrender amount

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72. According to the entire contract provision, what document must be made part of the insurance policy? (Choose from the following options) 1. Copy of the original application 2. Buyer's Guide 3. Agent's report 4. Outline of coverage

1 An insurance contract must contain a copy of the original application.

65. Which of the following best describes annually renewable term insurance? (Choose from the following options) 1. It is level term insurance. 2. It requires proof of insurability at each renewal. 3. Neither the premium nor the death benefit is affected by the insured's age. 4. It provides an annually increasing death benefit.

1 Annually renewable term is a form of level term insurance that offers the most insurance at the lowest cost.

76. How often must the Superintendent examine financial affairs of domestic insurers? (Choose from the following options) 1. 3 years 2. 5 years 3. 10 years 4. 2 years

1 Domestic insurers must be examined at least once every 3 years regarding their condition, fulfillment of contractual obligations, and compliance with applicable laws.

91. Which of the following is NOT true regarding Equity Indexed Annuities? (Choose from the following options) 1. They earn lower interest rates than fixed annuities. 2. The insurance company keeps a percentage of the returns. 3. They have guaranteed minimum interest rates. 4. They are less risky than variable annuities.

1 Equity Indexed Annuities invest on an aggressive basis in order to yield higher returns. Like a fixed annuity, Equity Indexed Annuities have guaranteed minimum interest rates. The insurance company often keeps a predetermined percentage of the return and pays the rest to the annuity owner. Equity Indexed Annuities are less risky than variable annuities and earn higher interest rates than fixed annuities.

35. In insurance, an offer is usually made when (Choose from the following options) 1. An applicant submits an application to the insurer. 2. The insurer approves the application and receives the initial premium. 3. The agent hands the policy to the policyholder. 4. An agent explains a policy to a potential applicant.

1 In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy.

59. If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insured, it is called a (Choose from the following options) 1. Joint life annuity. 2. Joint and survivor annuity. 3. Deferred annuity. 4. Pure annuity.

1 Joint life annuity settlement option pays benefits to two or more annuitants, but stops upon the death of the first.

46. When an annuity is written, whose life expectancy is taken into account? (Choose from the following options) 1. Annuitant 2. Beneficiary 3. Life expectancy is not a factor when writing an annuity. 4. Owner

1 The annuitant receives payments from an annuity and is the person whose life expectancy is considered when writing the contract. The annuitant and annuity owner are often the same person but do not have to be.

26. Which is TRUE about the cash surrender nonforfeiture option? (Choose from the following options) 1. Funds exceeding the premium paid are taxable as ordinary income. 2. After the cash surrender, the insured is covered for a grace period of one month. 3. The policy remains active for some time after the policyholder opts for cash surrender. 4. The policyholder receives the original cash value of the policy.

1 The insurers surrender the policy at its current cash value. Only any excess of value is taxable as income. Once the policyholder opts for cash surrender, the policy is immediately inactive.

95. According to the nonforfeiture law, if the owner decides to surrender a deferred annuity prior to annuitization, the owner is entitled to which of the following? (Choose from the following options) 1. Full premium refund without any charges 2. Guaranteed surrender value 3. No payments 4. Annuity dividends

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97. In life insurance policies, cash value increases (Choose from the following options) 1. Are only taxed when the owner reaches age 65. 2. Grow tax deferred. 3. Are income taxable immediately. 4. Are taxed annually.

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31. The LEAST expensive first-year premium is found in which of the following policies? (Choose from the following options) 1. Level Term 2. Annually Renewable Term 3. Increasing Term 4. Decreasing Term

2 Annually renewable term is the purest form of term insurance. The death benefit remains level, but the premium increases each year with the insured's attained age. In decreasing policies, while the face amount decreases, the premium remains constant throughout the life of the contracts. In level term and increasing term policies, the premium also remains level for the term of the policy. Therefore, in the other types of level policies, the first-year premium would not be different from any other year.

27. An insured receives an annual life insurance dividend check. What term best describes this arrangement? (Choose from the following options) 1. Accumulation at Interest 2. Cash option 3. Reduction of Premium 4. Annual Dividend Provision

2 The cash option allows an insurer to send the policyholder an annual, nontaxable dividend check.

14. All of the following are characteristics of a group life insurance plan EXCEPT (Choose from the following options) 1. The cost of the plan is determined by the average age of the group. 2. There is a requirement to prove insurability on the part of the participants. 3. The participants receive a Certificate of Insurance as their proof of insurance. 4. A minimum number of participants is required in order to underwrite the plan.

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21. When J. applied for a life insurance policy, the agent informed him that a medical exam would be required. The exam may be completed by (Choose from the following options) 1. A physician of the applicant's choice and at his expense. 2. A home office underwriter. 3. A paramedic or examining physician at the insurer's expense. 4. The agent.

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24. Which of the following terms is used to name the nontaxed return of unused premiums? (Choose from the following options) 1. Interest 2. Surrender 3. Dividend 4. Premium return

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32. If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a (Choose from the following options) 1. Nonforfeiture option. 2. Rollover. 3. Settlement option. 4. Nontaxable exchange.

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41. What must happen when an individual policy or annuity has been personally delivered to the policyowner? (Choose from the following options) 1. The producer must go over the policy with the policyowner. 2. A notary public must witness the exchange. 3. The policyowner must sign a delivery receipt. 4. The policyowner must pay the annual premium in full.

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67. A viatical settlement is arranged between a viatical company and a/an (Choose from the following options) 1. Beneficiary. 2. Lender. 3. Terminally ill insured. 4. Insurance producer.

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79. What is the maximum civil penalty for violating the Superintendent's cease and desist order? (Choose from the following options) 1. $1,000 2. $5,000 3. $10,000 4. $15,000

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93. Which of the following is true regarding examination of financial affairs of insurers? (Choose from the following options) 1. Examinations are conducted by the NAIC. 2. Examinations must be conducted at least annually. 3. Examination expenses are the responsibility of the insurer. 4. The Superintendent must examine all insurers: domestic, foreign and alien.

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96. Which of the following is NOT a characteristic of an insurable risk? (Choose from the following options) 1. The loss must be measurable. 2. The loss exposure must be large. 3. The loss must be catastrophic. 4. The loss must be due to chance.

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52. All of the following are regulated areas of the insurance industry EXCEPT (Choose from the following options) 1. Trade practices. 2. Investments. 3. Commissions. 4. Agents.

3 The Superintendent of insurance is charged by the insurance code to regulate the business of insurance in the state. Commissions, however, are negotiated between the insurer and agent.

80. An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement? (Choose from the following options) 1. $0 2. $100,000 3. $200,000 4. $100,000 plus the total of paid premiums

3 The beneficiary would most likely receive twice the face value of the policy, since his fatal injuries were caused by an accident and he died within the 90-day benefit limit stipulated in most policies.

58. The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change? (Choose from the following options) 1. The death benefit can be increased only when the policy has developed a cash value. 2. The death benefit can be increased only by exchanging the existing policy for a new one. 3. The death benefit can be increased by providing evidence of insurability. 4. The death benefit cannot be increased.

3 The reinstatement provision allows the policyowner an opportunity to put a lapsed policy back in force, subject to proving continued insurability. If the policyowner elects to reinstate the policy, as opposed to purchasing a new policy, the reinstated policy is restored to its original status.

50. Which of the following is NOT true regarding the annuitant? (Choose from the following options) 1. The annuitant receives the annuity benefits. 2. The annuitant must be a natural person. 3. The annuitant cannot be the same person as the annuity owner. 4. The annuitant's life expectancy is taken into consideration for the annuity.

3 While they don't have to be, the annuitant and annuity owner are often the same person. The annuitant is the person who receives benefits or payments from the annuity and for whom the annuity is written. Since the annuitant's life expectancy is taken into consideration, the annuitant must be a natural person.

60. A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as (Choose from the following options) 1. Survivorship insurance. 2. Juvenile protection provision. 3. Survivor protection. 4. Life planning.

3 Life insurance can provide the funds necessary for the survivors of the insured to be able to maintain their lifestyle in the event of the insured's death. This is known as survivor protection.

48. An insured stops making payments on a loan taken from his cash value policy. What will most likely happen? (Choose from the following options) 1. The insurer will increase the interest rate on the loan and charge a penalty. 2. The insurer will not permit the policyowner to take out any more loans. 3. The policy will be reduced to an extended term option. 4. The policy will terminate when the loan amount with interest equals or exceeds the cash value.

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57. An insured states her age as 40 on the application. When she dies, the insurer discovers that she was actually only 37 at the time of application. What will the insurance company do? (Choose from the following options) 1. Pay a decreased death benefit 2. Pay an increased death benefit 3. Pay nothing since there was a material misrepresentation on the application 4. Pay the death benefit in the amount that the premium at the correct age would have purchased

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81. The Waiver of Cost of Insurance rider is found in what type of insurance? (Choose from the following options) 1. Whole Life 2. Joint and Survivor 3. Juvenile Life 4. Universal Life

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83. Which of the following best describes taxation during the accumulation period of an annuity? (Choose from the following options) 1. The annuity is subject to state taxes only. 2. The annuity is subject to both state and federal taxation. 3. The growth is subject to immediate taxation. 4. Taxes are deferred.

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85. 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? (Choose from the following options) 1. Joint and survivor 2. Life with period certain 3. Joint limited annuity 4. Joint life

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98. All of the following are requirements for life insurance illustrations EXCEPT (Choose from the following options) 1. They may only be used as approved. 2. They must identify nonguaranteed values. 3. They must differentiate between guaranteed and projected amounts. 4. They must be part of the contract.

4 An illustration may not be altered by an agent and must clearly state that it is not part of the contract. It is legal to list nonguaranteed values in the contract, but they must be specifically labeled as projected, not guaranteed values.

13. Which of the following is true regarding a waiver of a surrender charge on an annuity contract? (Choose from the following options) 1. The charge can only be waived if the annuitant needs the funds for medical expenses. 2. The surrender charge will be applied to all premature surrenders. 3. The surrender charge waiver only applies to immediate annuity. 4. The charge may be waived if the annuitant is confined to a long-term care facility for at least 30 days.

4 Annuity contracts provide for a waiver of surrender charges if the annuitant is confined to a Long-term Care facility for at least 30 days.

68. 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? (Choose from the following options) 1. A business partner of the insured 2. The wife of the deceased insured 3. The former wife of the deceased insured 4. A minor son of the insured

4 Because a minor does not have the legal capacity to release the insurer from further obligation, benefits normally have to be passed through a guardian or trustee.

84. The type of insurance sold to a debtor and designed to pay the amount due on a loan if the debtor dies before the loan is repaid is called (Choose from the following options) 1. Credit health. 2. Decreasing whole life. 3. Multiple Protection insurance. 4. Credit life.

4 Credit life is most often sold by lenders and is term insurance written with a face amount and term that is matched to the amount and length of the loan period. Credit insurance is a special type of coverage written to insure the life of the debtor and pay off the balance of a loan in the event of the death of the debtor.

66. What happens if a deferred annuity is surrendered before the annuitization period? (Choose from the following options) 1. The owner will only receive a refund of premium. 2. The insurer can only apply the surrender value toward another annuity. 3. Deferred annuities cannot be surrendered prior to the annuitization period. 4. The owner will receive the surrender value of the annuity.

4 If a deferred annuity is surrendered prior to annuitization, the surrender value of the annuity is guaranteed according to the nonforfeiture provision.

37. An applicant buys a nonqualified annuity, but dies before the starting date. For which of the following beneficiaries would the interest accumulated in the annuity NOT be taxable? (Choose from the following options) 1. Charitable organization 2. Dependents 3. Annuitant 4. Spouse

4 If an annuities contract holder dies before the effective starting date, the contract's interest continues to be taxable, unless the beneficiary is a spouse. In that case, this tax can be deferred.

61. What is the waiting period on a Waiver of Premium rider in life insurance policies? (Choose from the following options) 1. 30 days 2. 3 months 3. 5 months 4. 6 months

4 Most insurers impose a 6-month waiting period from the time of disability until the first premium is waived.

55. What is the advantage of reinstating a policy instead of applying for a new one? (Choose from the following options) 1. Proof of insurability is not required. 2. The face amount can be increased. 3. The cash values have gained interest while the policy was lapsed. 4. The original age is used for premium determination.

4 The reinstatement provision allows the policyowner an opportunity to put a lapsed policy back in force, subject to proving continued insurability. If the policyowner elects to reinstate the policy, as opposed to purchasing a new policy, the reinstated policy is restored to its original status.

71. Traditional IRA contributions are tax deductible based on which of the following? (Choose from the following options) 1. How long the plan has been in force 2. Owner's age 3. IRA limit 4. Owner's income

4 Traditional IRA contributions are tax deductible, but may be limited if the owner's income exceeds a certain level.

38. If a settlement option is not chosen by the policyowner or the beneficiary, which option will be used? (Choose from the following options) 1. Life income 2. Fixed period 3. Fixed amount 4. Lump sum

4 Upon the death of the insured, or endowment, the contract is designed to pay the proceeds in cash, called a lump sum, unless the recipient chooses an optional mode of settlement.

90. 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? (Choose from the following options) 1. Needs approach 2. Blackout approach 3. Lump-sum approach 4. Human life value approach (HLVA)

4 Human life value approach is determined by the loss of income that would result with the death of the insured, after making adjustments for expenses, inflation, etc.

#68. 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) A business partner of the insured b) The wife of the deceased insured c) The former wife of the deceased insured d) A minor son of the insured

B Because a minor does not have the legal capacity to release the insurer from further obligation, benefits normally have to be passed through a guardian or trustee.

#5. All of the following are true of an annuity owner EXCEPT a) The owner has the right to name the beneficiary. b) The owner is the party who may surrender the annuity. c) The owner must be the party to receive benefits. d) The owner pays the premiums on the annuity.

C The "owner" is the person who purchases the contract and has all of the rights such as naming the beneficiary and surrendering the annuall of the rights such as naming the beneficiary and surrendering the annuity. The owner, however, does not have to be the one who receives the benefits; it could be the annuitant (if different from the owner) or the beneficiary.ity. The owner, however, does not have to be the one who receives the benefits; it could be the annuitant (if different from the owner) or the beneficiary.

#4. The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive? a) $0 b) $50,000 (50% of the policy value) c) $100,000 d) $300,000 (triple the amount of policy value)

C The triple indemnity accidental death rider obligates the company to pay three times the face amount of the policy if the insured dies as a result of an accident. The death must be accidental and not contributed to by any other factors and must occur within 90 days of the accident. In this case, since the insured contributed to his own death, the triple indemnity rider is void, but the beneficiary will still receive the policy's death benefit.

#11. Which of the following statements is TRUE concerning the Accidental Death Rider? a) It is also known as a triple indemnity rider. b) This rider is only available to insureds over the age of 65. c) It is only available in group insurance. d) It will pay double or triple the face amount.

D Individuals who are not covered by an employer-sponsored plan may deduct the amount of their IRA contributions regardless of their income level.

78. What is the penalty for IRA distributions that are below the required minimum for the year? (Choose from the following options) 1. 10% 2. 25% 3. 50% 4. 60%

c If there are no distributions at the required age, or if the distributions are not large enough, the penalty is 50% of the shortfall from the required annual amount.

#69. Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die? a) Whole Life b) Ordinary Life c) Joint Life d) Decreasing Term

c A Joint Life policy covering two lives would be the least expensive because the premiums are based on an average age, and it would pay a death benefit only at the first death.