Exam practice for Life Insurance

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as

Contracts of Adhesion

What happens when a policy is surrendered for its cash value?

Coverage ends and the policy cannot be reinstated

Which of the following is NOT an example of valid insurable interest?

Debtor in the life of the creditor

An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would best suited to this situation?

Decreasing term

If the annuitant dies before the annuitization period starts, what will the beneficiary receive?

Either the amount paid into the plan or the cash value, whichever is greater amount

If a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT

Erase the incorrect answer and record the correct answer.

In the event if terminated illness or injury, accelerated benefits pay earlier than scheduled a portion of the policy's

Face amount

Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information?

Fair Credit Reporting Act

When an employee terminates coverage under a group insurance policy, coverage continues in force

For 31 days.

Which is TRUE about the cash surrender nonforfeiture option?

Funds exceeding the premium paid are taxable as ordinary income.

In life insurance policies,cash value increases

Grow tax deferred.

An insured purchased a life insurance policy on his life naming his wife as primary beneficiary, and his daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?

If the primary beneficiary predeceases the insured

What type of insurance would be used for a Return of Premium rider?

Increasing Term

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

Inspection report

A life insurance policy has a legal purpose if both of which of the following elements exist?

Insurable interest and consent

The Medical Information Bureau (MIB) was created to protect

Insurance companies from adverse selection by high risk persons.

Which of the followings is NOT true regarding a Premium Fund Trust Account?

It could be used a claim payment account

Which of the following statements about the reinstatement provision is true?

It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated.

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

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

Insured buys a 5 year level premium term policy with a face amount of $10000. Policy also contains renewability and convertibility options. When insured renews in 5 years, what happens to the premium?

It will increase because the insured will be 5 years older than when the policy was originally issued.

The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called

Joint and survivor

A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this?

Level term

A nonresident licensed producer moves to Illinois and wants to obtain a license in this state. Which of the following is true regarding the licensing examination?

No examination will be required

What is a definition of a unilateral contract?

One-sided: only one party makes an enforceable promise

Which of the following explains the policyowner's rights to change beneficiaries, choose options, and receive proceeds of a policy?

Owners rights

The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this?

Reduction of premium

When an insured a life insurance policy, the designated beneficiary received the face amount of the policy, as well as a refund of all of the premiums paid. Which rider is attached to the policy?

Return of premium

Equity Indexed Annuities

Seek higher returns

Which of the following best details the underwriting process for life insurance?

Selection, classification, and rating of risks

In the event of a licensed producer dies, a temporary license may be issued to the deceased producer's representative. This temporary license is allow the licensee to all of the following EXCEPT

Solicit insurance

Which of the following would help prevent a universal life policy from lapsing?

Target premium

The premium paid by the employer in a business life insurance policy are

Tax deductible by the employer

Which of the following is an example of a producer being involved in an unfair trade practice of rebating ?

Telling a client that his first premium will be waived if he purchased the insurance policy today

Nonforfeiture values guarantee which of the following for the policyowner?

That the cash value will not be lost

All of the following statements about equity index annuities are correct EXCEPT

The annuitant receives a fixed amount of return

If a life insurance policy has an irrevocable beneficiary designation,

The beneficiary can only be changed with written permission of the beneficiary

The Director notifies a producer of license termination on March 1. On April 15, the Director receives a request to review the charges in a court of law. What is the latest possible court date that can be set for the hearing?

The court date will not be established

The insured has his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insurers death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPT

The insured age of death

Which of the following would provide an underwriter with information concerning an applicant's health history?

The medical information bureau (MIB)

All of the following would be eligible to establish a Keogh retirement plan EXCEPT

The president and employee of a family corporation

An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?

The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.

The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called

Waiver of Premium

In forming an insurance contract, when does acceptance usually occur?

When an insurer's underwriter approves coverage

When would a 20-pay whole life policy endow?

When the insured reaches age 100

Which of the following components must a life insurance policy have to allow policy loans?

cash value

All of the following are regulated areas of insurance Industry EXCEPT

commissions

What provision in an insurance policy extends coverage beyond the premium due date?

grace period

What required provision protects against unintentional policy lapse?

grace period

Which of the following applies to the 10-day free-look privilege?

it permits the insured to return the policy for a full refund of premiums paid

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

one-year term option

If an actuary would like to sell life insurance policies, what licensure is needed?

producer's license for life insurance

Which of the following insurers are owned by stockholders ?

stock

All of the following are true about variable products EXCEPT

the premiums are invested in the insurer's general account

An individual purchased a $100,000 Joint Life policy on himself and his wife. Eight years later, he died in an automobile accident. How much will his wife receive from the policy?

$100,000

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?

$100,000

The insured is also the policyowner of a whole life policy. What age must the insured attain in order to receive the policy's face amount?

100

An individual whose license is denied or revoked will be illegible to apply for a license period of

3 years

Which of the following is the required number of participants in a contributory group plan?

75%

A person in the process of becoming permanently licensed as a producer. A temporary producer's license may be issued for maximum period of

90 days

Which of the following would be required to be licensed as an insurance producer?

A salaried employee who advertises and solicits insurancea

In insurance, an offer is usually made when

An applicant submits an application to the insurer

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

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

100

Group life insurance is a single policy written to provide coverage to members of a group. Which of the following statements concerning group life CORRECT?

100% participation of members is required in non contributory plans

If a viatical settlement provide moves his business the new address must be reported to the director within

30 days

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

A producer promptly forwarding premiums to the insurance company

Which of the following is INCORRECT regarding a $100,000 20-year levers term policy?

At the end of 20 years, the policy's cash value will be equal $100,000

Which of the following is NOT an exclusion to the requirement stating that no insurer may recommend the purchase of an annuity if the recommendation results in an insurance transaction unless the recommendation is suitable for the consumer?

Contracts designed for senior residents

All of the following statements concerning dividends are true EXCEPT

Dividend amounts are guaranteed in the policy

In what capacity does an insurance producer act in the conduct of the business when handling premium funds?

Fiduciary

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

What are two components of a universal policy?

Insurance and cash account

When Y applied for insurance and paid the initial premium on August 14, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the risk or classify it other than as standard. Y was killed in an automobile accident on August 22, before the policy was issued. In this case, the insurance company will

Issue the policy anyway and pay the face value to the beneficiary

In the underwriting process, it was determined that the applicant for life insurance is in poor health and has some dangerous habits. Which of the following is true concerning the policy premium?

It will likely be higher because the applicant is a substandard risk.

Which of the following has the rights to convert the existing term coverage to permanent insurance ?

Policyowner

An insured will be allowed to reactivate her lapsed life insurance policy if action is taken within a certain period of time, and proof of insurability is provided. Which policy provision allows this?

Reinstatement provision

Which type of retirement account does not require the owner to start taking distributions at age 72?

Roth IRA

If an agent wishes to sell variable life policies, what license must the agent obtain?

Securities

If a non resident if applying for a license in Illinois and his home state does not require continuing education for Illinois residents,

The continuing education requirement will be waived in Illinois

Which of the following describes the tax advantage of qualified retirement plan?

The earnings in the plan accumulate tax deferred.

What is the advantage of reinstating a policy instead of applying for a new one?

The original age is used for premium determination

The policy owner of a universal life policy may skip paying the premium and the policy will not lapse as long as

The policy contains sufficient cash value to cover the cost of insurance.

A group insurance policy was solicited by a limited insurance representative. Which of the following is true according to the disclosure regulation?

The representative's name and signature must appear on the master policy

Which of the following is NOT true regarding Equity Indexed Annuities?

They earn lower interest rates than fixed annuities.

Which of the following is TRUE for both equity indexed annuities and fixed annuities?

They have a guaranteed minimum interest rate.

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

To help customers make educated decisions in buying life insurancea

All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT

Upon conversion, the death benefit of the permanent policy will be reduced by 50%

Which of the following types of policies allows for a flexible premium and a variable investment component?

Variable universal life insurancew

What is the name of the insured who enters into viatical settlement ?

Viator

All of the following are personal uses of life insurance EXCEPT

buy-sell agreement

Which of the following would describe a legal document which would dictate who can buy a deceased partner's share of a business and for what amount?

buy-sell agreement

A business owner was trying to obtain a bank loan to fund the purchase of a new business facility, but the bank required proof of additional assets to secure the loan. The business owner then decided to use her $250,000 life insurance policy to secure the loan. Which provision makes this possible?

collateral assignment

An insured pays an annual premium to his insurer. In return, the insurer promises to pay benefits in accordance with the terms of the contract. This is called

consideration