CO Life General State Exam

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

S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made?

Automatic Policy Loan

All of these insurance products require an agent to have proper FINRA securities registration in order to sell them, EXCEPT for:

Modified Whole Life

All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death EXCEPT

Interest Only

A Universal Life policy is sometimes referred to as an unbundled life policy because the owner can see the

Interest earned, cost of insurance, and expense charges

Which of these arrangements allows one to bypass insurable interest laws?

Investor-Originated Life Insurance

What kind of premium does a Whole Life policy have?

Level

Which of these is NOT considered to be a right given to a policyowner?

Modify a provision in the insurance contract

M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?

Pay face amount minus the past due premium

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

Revocable

__ of personal life insurance premiums is usually deductible for federal income tax purposes.

0%

G purchased a Family Income policy at age 40, The policy has a 20-year rider period. If G were to die at age 50, how long would G's family receive an income?

10 years

A 15-year mortgage is best protected by what kind of policy?

15-year decreasing term

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

J is 35-years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value?

20-pay Life

One becomes eligible for Social Security disability benefits after having been disabled for

5 months

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

59 1/2

A fiduciary responsibility is defined as

A relationship of special trust and confidence when a person is entrusted with another's funds

Under a Graded Premium policy, the premiums

Are lower during the policies early years

In a qualified retirement plan, the yearly contributions to an employee's account

Are restricted to maximum levels set by the IRS

Which of the following documents are NOT required to mention the Colorado Fraud Statute?

Certificates of authority

Which of the following consists of an offer, acceptance, and consideration?

Contract

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 provision allows the policyowner to change a term life policy to a permanent one without providing proof of good health?

Conversion

What is the purpose of the U.S.A. Patriot Act?

Detect and deter terrorism

An employee requested that the balance of her 401(k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately has the funds rolled over into an IRA. What is the tax consequence of the distribution sent to this employee?

Distribution is subject to federal income tax withholding

Which of these statements describe a Modified Endowment Contract (MEC)?

Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract

In a life insurance policy, which feature states that the policy will not cover certain risks?

Exclusion

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

Extra premium

Which of the following words may be used in the advertisement of life insurance or annuities?

Guaranteed

In life insurance, the needs approach is used mostly to establish:

How much life insurance a client should apply for

A life insurance arrangement which circumvents insurable interest statutes is called:

Investor-Originated Life Insurance

An insured's ability to perform two or more activities of daily living may trigger which type of life policy rider?

Long term care

The entity whose sole purpose is sharing medical data among its member companies is called the

Medical Information Bureau (MIB)

When funds are shifted straight from one IRA to another IRA, what percentage of the tax is withheld?

None

A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision?

Payor provision

Insurance policies are considered aleatory contracts because

Performance is conditioned upon a future occurance

Which of these do NOT constitute policy delivery?

Policy issued with a rating

A Medical Information Report (MIB) may disclose which of the following:

Prior use of marijuana

Which of these terms accurately defines an underwriter's assessment of information on a life insurance application?

Risk classification

Post-tax dollar contributions are found in:

Roth IRA Investments

Which of the following are Equity Indexed annuities typically invested in?

S&P 500

What is the Suicide provision designed to do?

Safeguard the insurer from an applicant who is contemplating suicide

Which of the following types of permanent life insurance policies offers the highest initial cash value?

Single premium

What type of life insurance are credit policies issued as?

Term

What type of life insurance gives the greatest amount of coverage for a limited period of time?

Term life

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

Term rider

Which of these life insurance riders allows the applicant to have excess coverage?

Term rider

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?

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

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

Variable Universal Life

A life policy that contains a monthly mortality charge as well as self-directed investment choices is called a(n)

Variable Universal Life Policy

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

A policy that becomes a Modified Endowment Contract (MEC):

Will lose many of its tax advantages

In order to sell a (n)___ Life policy, a producer is required to register with Financial Industry Regulatory Authority (FINRA).

Variable

What type of annuity has a cash value that is based upon the performance of it's underlying investment funds?

Variable

A life policy with a death benefit and cash value that can fluctuate according to the performance of its underlying investment portfolio is referred to as

Variable Life

The amount of monthly disability benefits payable under Social Security is affected by which of the following factors?

Amount of benefits available from other sources

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

Annuity

When a policyowner cash surrenders a Universal Life insurance policy in it's early years, this may be considered a red flag for a(n)

Anti-Money Laundering Violation

In order for coverage on a non-medical insurance application to take effect the same day, the producer must collect a signed application and

The initial premium

The Consideration clause in a life insurance policy indicates that a policyowner's consideration consists of a completed application and

The initial premium

S buys a $50,000 whole life policy with a $50,000 Accidental Death and Dismemberment rider. S dies 1 year later of natural causes. How much will the insurer pay the beneficiary?

$50,000

An insurer that terminates a producer's appointment must inform the Commissioner within how many days?

30 days

A producer must remit premiums to the insurer within __ days after the receipt

45 days

When replacing an existing life insurance policy, the replacing insurer must notify the existing insurer within

5 business days

Which of these is an element of a Variable Life Policy?

A fixed, level premium

Traditional Individual Retirement Annuity (IRA) distributions must start by:

April 1st of the following year the participant attains age 70 1/2

How do life insurance companies handle cases where the insured commits suicide within the contract's stated Contestable period?

Claims are denied under the Suicide clause of the policy

Which of these actions is taken when a policyowner uses a Life Insurance policy as collateral for a bank loan?

Collateral assignment

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

Conditional

K applies for a life insurance policy on herself and submits the initial premium with the application. She is given a receipt by the agent stating that coverage begins immediately if the application is approved. What kind of receipt was used?

Conditional

T is given a receipt after completing a life insurance application and paying the initial premium. Under this situation, T's coverage is

Conditional, depending on the insurer's underwriting guidelines

The incontestable clause allows an insurer to

Contest a claim during the contestable period

When a policyowner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply?

Conversion provision

An employee of 20 years recently retired at age 59 1/2. This employee's group life contract can be

Converted to an individual permanent policy at an individual rate

Which of these statements is INCORRECT regarding the federal income tax treatment of life insurance?

Entire cash surrender value is taxable

Taking receipt of premiums and holding them for the insurance company is an example of

Fiduciary responsibility

Which of the following offers an insurance applicant the right to review the contract and receive a full refund?

Free-look period

M completes an application for life insurance but does not pay the initial premium. All of these actions must occur before M's policy goes into effect EXCEPT

Free-look period has expired

A 55 year old recently received a $30,000 distribution from a previous employer's 401k plan, minus the $6,000 withholding. Which federal taxes apply if none of the funds were rolled over?

Income taxes plus a 10% penalty tax on $30,000

Which of the following actions require a policyowner to provide proof of insurability in an Adjustable Life policy?

Increase face amount

How does an indexed annuity differ from a fixed annuity?

Indexed annuity owners may receive credited interest tied to the fluctuations of the linked index

What type of life policy covers two people and pays upon the death of the last insured?

Survivorship

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

Life and health insurance policies are

Unilateral contracts

Which of the following Life insurance policies combine term insurance with an investment element?

Universal Life

The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a(n)

Accidental Death and Dismemberment rider (AD&D)

Variable Whole Life Insurance can be described as

Both an insurance and securities product

Which statement about a whole life policy is true?

Cash value may be borrowed against

The type of annuity that can be purchased with one monetary deposit is called a(n):

Immediate annuity

A policyowner is allowed to pay premiums more than once a year under which provision?

Mode of Premium

In an individual retirement account (IRA), rollover contributions are

Not limited by dollar amount

What is the maximum amount the Commissioner can fine an insurer for each violation of a cease and desist order?

$10,000

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

Three law partners form a Cross-Purchase Buy and Sell agreement. This agreement is funded with individual life insurance. How many total life policies are needed for this agreement?

6

An insurer may normally delay the payment of a cash value loan or surrender value for up to

6 months

An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the

Applicant's physician

How does the Commissioner attain his position?

Appointed by the governor

P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take?

Beneficiary will be paid the death benefit

Under an Interest Sensitive Whole Life policy,

Cash values are determined by interest rates

S is covered by a whole life policy. Which insurance product can cover his children?

Child term rider

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

Church plans

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

Decreasing term

How are surrender charges deducted in a life policy with a rear-end loaded provision?

Deducted when the policy is discontinued

How are Roth IRA distributions normally taxed?

Distributions are received tax-free

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

The payments on Q's annuity are no less than $250 quarterly. Which of the following annuities does Q own?

Flexible Installment Deferred

Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". How can this be interpreted?

If Tom's employment is terminated, 20% of the funds would be forfeited

K's whole life insurance policy lapsed two months ago due to nonpayment. She would now like to reinstate the policy. All of these statements are correct about the policy's reinstatement EXCEPT

K will forfeit the right to use the automatic loan provision upon reinstatement

D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed?

Level term

Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?

Life Income

Which of these is NOT relevant when determining the amount of personal life insurance needed?

Local unemployment rate

Which of the following statements is CORRECT about accelerated death benefits?

Must have a terminal illness to qualify

Which statement is TRUE in regards to a policy loan?

Past-due interest on a policy loan is added to the total debt

Which of these statements concerning an Individual Straight Life annuity is accurate?

Payments are made to an annuitant for life

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?

Split-dollar plan

Why must an insurance applicant answer all questions on the application?

Statements and representations on the application are part of the consideration for issuing a policy

The premiums paid by an employer for his employee's group life insurance are usually considered to be

Tax-deductible to the employer

Upon policy delivery, a signed good health statement is requested from the applicant. Why would this be necessary?

The initial premium was NOT submitted with the application

A policy of adhesion can only be modified by whom?

The insurance company

The amount of coverage on a group credit life policy is limited to

The insured's total loan value

All of these statements about Equity Indexed Life Insurance are correct EXCEPT

The premiums can be lowered or raised, based on investment performance

The Consideration clause of an insurance contract includes

The schedule and amount of premium payments

An insurer cannot deny a claim unless

There is a reasonable explanation of the claim

All of these are considered to be a benefit under Social Security EXCEPT

Unemployment

S, age 40, is looking to buy a Life Insurance policy that will allow for increases or decreases in coverage as his needs change. The policy best suited for S would be

Universal Life

When is the face amount paid under a Joint Life and Survivor policy?

Upon the death of the last insured

A(n) __ annuity pays benefits based on units rather than stated dollar amounts.

Variable

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

Variable life

ABC Insurance Company has accepted a life insurance application which contains unanswered questions. The company then makes the application part of the life contract. In this situation, the insurer has

Waived one of its legal rights

When is it appropriate for a producer's spouse to be the primary beneficiary on an applicant's life insurance policy?

When insurable interest exists

Dividends paid from a life insurance policy are

issued by the insurer

All of these are considered sources of underwriting information about an applicant EXCEPT

Rating Services

In Colorado, all of the following are considered unfair trade practices EXCEPT

Replacement

Who is not eligible to receive commissions from the sale of an insurance product?

Corporate executive

Which statement regarding the Misstatement of Age provision is considered to be true?

Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered

If a producer completes an insurance application, collects the initial premium, and issues the appropriate receipt,

Coverage will be contingent upon the insurer's underwriting policies

Circulation of a maliciously critical statement about any insurer's financial condition to injure the insurer is called:

Defamation

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

A variable insurance policy:

Does not guarantee a return on its investment accounts

P owns a $25,000 Life Policy that pays the face amount to him if he lives to age 70, or to his beneficiary if he dies before age 70. What kind of policy does P own?

Endowment at Age 70

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 of these Nonforfeiture Options continue a build-up of cash value?

Reduced Paid-Up

Interest on life insurance proceeds is

Required if the claim was not paid within 30 days of the date insurer received the claim

S buys a $10,000 Whole Life policy in 2003 and pays an annual premium of $100. S dies 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did S include on the policy?

Return of premium rider

Which of the following types of policies pays a benefit if the insured goes blind?

AD&D

A Term Life rider offers the insured

Additional life coverage

What is considered to be a characteristic of an immediate annuity?

Benefit payments start within one payment period of purchase

If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?

Insured

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

In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy?

Owner's Rights

P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability?

P will still receive declared dividends

All of the following statements are true regarding a policy's Grace Period, EXCEPT:

Past due premiums are waived

The __ has the right to change a life insurance policy's beneficiary.

Policyowner

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

Policyowner

What benefit does the Payor clause on a Juvenile Life policy provide?

Premiums are waived if payor becomes disabled

Consumer reports requested by an underwriter during the application process of a life insurance policy can be used to determine

Probability of making timely premium payments

If a producer is going to deposit any premium into a bank account prior to remitting the funds to the insurer, he/she must use a

Separate insurance trust account

Which of these is NOT a reason for purchasing life insurance on the life of a minor?

If both parents were to die, it would provide death benefits to the child

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

In a Key Employee life insurance policy, the third-party owner can be all of the following, EXCEPT:

Insured

Which of the following statements is true regarding the replacement of a life insurance policy in Colorado?

The replacing insurer must maintain copies of all records regarding the replacement for at least 5 years