Exam FX Life Insurance Master Set

Anyone who violates the Insurance Code of Texas may be fined up to

$25,000.

What percentage of a company's employees must take part in a noncontributory group life plan?

100%

In Texas, an insurer or agent must respond to the Commissioner regarding a complaint brought against them within

15 days.

How long is the incontestability period in group life insurance policies issued in Texas?

2 years

Conversion to an individual whole life policy is permitted without evidence of insurability within how many days of the termination of employment?

31 days

How long is the grace period in group policies?

31 days

To attain currently insured status under Social Security, a worker must have earned at least how many credits during the last 13 quarters?

6 credits

For how long is an insurance company allowed to defer policy loan requests?

6 months

The Commissioner of Insurance issues a cease and desist order to an agent. If the agent wishes to contest the charges in court, how many days after the order was issued does the agent have to make the request?

60 days

An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his

Attained age

The accelerated benefits provision will provide for an early payment of the death benefit when the insured

Becomes terminally ill

If an applicant for a life, insurance policy is found to be a substandard risk, the insurance company is most likely to

Charge a higher premium

And annuity owner is funding an annuity that Will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that will equal the performance of the standard and poor's 500 index. She would likely purchase an

Equity, indexed annuity

Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits?

Fixed amount

Which of the following is an example of an agent's fiduciary responsibilities?

Forwarding premiums to the insurer

If an insured worker has earned 40 quarters of coverage, the worker's status under Social Security disability is

Fully Insured

All advertisements are the responsibility of the

Insurer.

During a partial withdrawal from a universal life policy, which portion will be taxed?

Interest

Which of the following best describes annually renewable term insurance

It is level term insurance

Which of the following is true of a children's rider added to an insured's permanent life insurance policy?

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

A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that?

Joint Life Policy

Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?

Limited pay whole life

The premium of a survivorship life policy compared with that of a joint life policy would be

Lower

Applicant, who receives a preferred risk classification qualifies for

Lower premiums than a person who receives a standard risk

An insured purchased an insurance policy 5 years ago. Last year, the insured received a dividend check from the insurance company that was not taxable. This year, the insurer did not send a check. From what type of insurer did the insured purchase the policy?

Mutual

Which of the following documents must be provided to the policyowner or applicant during policy replacement?

Notice Regarding Replacement

To sell variable life, insurance policies, an agent must receive all of the following, except

SEC registration

An employee has group life insurance through her employer. After 5 years, she decides to leave the company and work independently. How can she obtain an individual policy?

She can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan.

Upon policy delivery, the producer may be required to obtain any of the following, except

Signed a waiver of premium

Which of the following riders is often used in business life insurance policies when the policyowner needs to change the insured under the policy

Substitute insured rider

The advantage of qualified plans to employers is

Tax-deductible contributions.

All of the following entities, regulates, variable life policies, except

The Guaranty association

If an insurer requires a medical examination of an applicant in connection with the application for life insurance, who is responsible for paying the cost of the examination

The insurer

All of the following are characteristics of a group life insurance plan EXCEPT

There is a requirement to prove insurability on the part of the participants.

Insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay loss is covered by the policy. What contract element does this describe?

Unilateral

The main difference between immediate and deferred annuities is

When the income payments begin

If a policy includes a free look period of at least 10 days, the buyers guide may be delivered to the applicant no later than

With the policy

Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE?

Withdrawals are not taxable.

Upon the submission of a death claim under a life insurance policy, when must the insurer pay the policy benefit?

Within 2 months

Which of the following is another term for an authorized insurer?

Admitted

When transacting business in this state an insurer formed under the laws of another country is known as a/an

Alien insurer.

The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective?

As of the application date

When must insurable interest exist in a life insurance policy?

At the time of application

Which entity has the authority to grant a temporary insurance agent's license?

Commissioner of Insurance

Because an insurance policy is a legal contract, must conform to the state laws, governing contracts, which require all of the following, except

Conditions

A rider that may be attached to a life insurance policy that will adjust the face amount based upon a specific index, such as the Consumer Price Index, is called

Cost of Living Rider

Which of the following would be the beneficiary in credit life insurance?

Creditor The creditor is the owner and the beneficiary of the policy.

An individual has just borrowed $10,000 from his bank on a five year installment loan requiring monthly payments. What type of life insurance policy would best suit this situation

Decreasing term

Which of the following is true regarding taxation of dividends in participating policies?

Dividends are not taxable.

An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering a(n)

Inspection report

Which of the following statements is TRUE about a policy assignment?

It transfers rights of ownership from the owner to another person.

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?

Joint life

A straight life policy has what type of premium

Level a level, annual premium for the life of the insured

Which of the following is an example of a limited pay life policy

Life paid at age 65

On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are

Not taxable since the IRS treats them as a return of a portion of the premium paid.

Traditional IRA contributions are tax deductible based on which of the following?

Owner's income

The regulations regarding replacement apply to which of the following?

Renewable term

Which is the appropriate action by the insurer if a prospective insured submitted an incomplete application

Return the application to the applicant for completion

The insurer discovered that one of the applicants for life insurance mistake couple of questions on the application. What must the insurer do with the application?

Return to the applicant for completion

Who is the owner of a credit life insurance policy?

The creditor

An employee quits his job on May 15 and doesn't convert his Group Life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. Which of the following statements best describes what will happen?

The insurer will pay the full death benefit from the group policy to the beneficiary.

All of the following are true regarding the convertibility option under a term life insurance policy except

The pond conversion, the death benefits of the permanent policy will be reduced by 50%

All of the following are true about variable products EXCEPT

The premiums are invested in the insurer's general account.

Which of the following is NOT true of life settlements?

The seller must be terminally ill

What is the main purpose of the regulation on life insurance policy illustrations?

To help customers make educated decisions in buying life insurance

All of the following benefits are available under Social Security EXCEPT

Welfare benefits

Which of the following riders added to a life insurance policy can pay part of the death benefit to the insured to cover expenses incurred in a nursing or convalescent home?

long term care

What is the waiting period on a Waiver of Premium rider in life insurance policies?

6 months

In Texas, the Commissioner of Insurance is

Appointed by the Governor.

What license or licenses are required to sell variable annuities?

Both a life insurance license and a securities license

Which of the following is TRUE about credit life insurance?

Creditor is the policyowner.

The Commissioner has full power and authority to do all of the following EXCEPT

Draft insurance laws

When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount?

Equal to the original policy for as long as the cash values will purchase.

Which of the following may be included on an insurance advertisement?

Testimonials from compensated individuals

What authority is responsible for examining the operations of insurance companies in this state?

The Commissioner

The initial amount of credit life insurance may NOT exceed

The amount to be repaid under the contract.

The following are all causes for the Insurance Commissioner to suspend or impose conditions upon the continuance of an agent's license EXCEPT

The applicant has been shown to be a poor personal credit risk.

Which of the following is an example of liquidity in a life insurance contract?

The cash value available to the policyowner

In a life settlement contract, whom does the life settlement broker represent?

The owner

Which of the following best defines the "owner" as it pertains to life settlement contracts?

The policyowner of the life insurance policy

What is the purpose of the buyers guide?

To allow the consumer to compare the cost of different policies

Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?

Warranty.

Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid

For 20 years or until death, whichever occurs first.

What provision in a life or health insurance policy extends coverage beyond the premium due date?

Grace period

Which of the following best describes a misrepresentation?

Issuing sales material with exaggerated statements about policy benefits

Who might receive dividends from a mutual insurer?

Policyholders

Most agents try to collect the initial premium for submission with the application. When an agent collects the initial premiums from the applicants, the agent should issue the applicant a

Premium receipt

Which of the following statements is correct about a standard risk classification in the same age group and with similar lifestyles?

Standard risk is representative of the majority of people.

a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back?

The balance of the loan will be taken out of the death benefit.

Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean?

The beneficiary will only receive payments of the interest earned on the death benefit.

An agent explains the details of a life insurance policy to a client. The agent does not realize, however, that the state has recently rewritten two of the provisions. As a result, the agent inadvertently misrepresents the policy, making it more attractive than it really is. What best describes this situation?

There is no misconduct

All of the following are true regarding a decreasing term policy EXCEPT

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

After filing a claim, an insured tells the insurer that there is more than one insurance policy in force. That insurer sets aside the claim until it hears what the other company will pay. The insurer's action will be classified as

unfair

A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision?

Automatic premium loan

All of the following statements concerning dividends are true EXCEPT

Dividend amounts are guaranteed in the policy

Stranger originated life, insurance policies are in direct opposition to the principal of

Insurable interest

What is the benefit of choosing extended term as a nonforfeiture option?

It has the highest amount of insurance protection

Which of the following is correct regarding credit life insurance?

It insures the life of a debtor.

Which of the following is true regarding the accumulation period of an annuity

It is a period during which the payments into the annuity grow tax deferred

Which of the following is NOT true regarding a Certificate of Authority?

It is issued to group insurance participants

An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosen is called

Paid-up additions.

An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident, and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do?

Pay a reduced death benefit

An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date?

The date of medical exam

If an insured withdraws a portion of the face amount in the form of accelerated benefits because of a terminal illness, how will that affect the payable death benefit from the policy?

The death benefit will be smaller.

Which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner?

Third-party ownership

What is the purpose of the Life Insurance Guaranty Association?

To help protect policyowners and beneficiaries against financial loss caused by the insolvency of an insurance company

At the time the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability. This rider is called

Guaranteed insurability

Concerning insurance, the definition of a fiduciary responsibility is

Handling insurer funds in a trust capacity.

When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to

Purchase a single premium policy for a reduced face amount

An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his

Attained age.

Which of the following is used to compare the cost of one life insurance policy against another in order to guide prospective purchasers to policies that are competitively priced?

Cost comparison methods

Which of the following occupations would NOT directly help to qualify someone for the office of Commissioner of Insurance?

Insurance agent

What describes the specific information about a policy?

Policy summary

All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT

The policy is owned by the company.

The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the

one-year term option