Final Exam insurance
Captive insurer
Which of the following types of insurers limits the exposures it writes to those of its owners?
Create a stream of income
The main purpose of an annuity is to
Transfer
A hold-harmless clause is an example of risk
When the first insured dies
At what point are death proceeds paid in a joint life insurance policy?
exempt from federal income tax
Death benefits from a life insurance policy are normally considered to be
Residing in a bordering state
In Massachusetts, an individual can be disqualified from obtaining a resident producer license by
Mortality, interest, expenses
Life insurance premiums are computed on what three factors?
Upon request of the Superintendent
Under what circumstances must a producer's insurance records be provided to the Massachusetts Superintendent of Insurance?
US Attorney General
Insurance crimes which affect interstate commerce are prosecuted by the
Prior to or at the time of signing the application
A life insurance producer is required to give a disclosure notice about information practices to an applicant or proposed insured
In the event of death the loan amount is deducted from the policy proceeds.
A policy owner has just borrowed from a life insurance policy's cash value. which of these statements is true.
Less than the face amount.
A policyowner has a life insurance policy where she had listed her age on the application as 5 years younger than her actual age. If she dies and the insurer discovers the misstatement of age, how much will the insurance company pay?
Accelerated (living) benefit
What is often payable to a life insurance policyowner when a medical condition drastically limits the insured's life expectancy?
Transfers some of the investment risk to the policyowner.
What is the effect of the market value adjustment in a market value adjustment annuity?
April 1st of the year following the year the participant attains age 70 1/2
Traditional individual retirement annuity (IRA) distributions must start by
Owner
When deferred annuity is surrendered, who must sign the authorization to do so?
Deferred
Which annuity allows contributions to an IRA?
The insurance company
A producer's cancellation of appointment must be reported to the Bureau of insurance by
Profit sharing plan
A retirement plan that sets aside part of the company's net income for distributions to qualified employees is called a
an improvement in future income
An individual who purchases a modified life insurance policy expects
Being financially liable for unauthorized acts by the producer.
An insurer may be responsible for all of the following EXCEPT
surrender charges.
Which of these annuity contract features is meant to discourage withdrawals and exchanges?
Business expenses
Which of these is NOT considered to be a cost connected with an individual's death?
Comparing the benefits of several insurance policies
Which of these is NOT considered to be an example of misrepresentation by a producer?
The policy's surrender charges
Which of these must be disclosed in a universal life policy?
Federal estate tax
Which tax cost is normally associated with death?
Minimize adverse selection
Why do insurers require a minimum number of employees participate in a group insurance plan?
Net payment cost index
Wyatt is shopping for life insurance and is mainly concerned with the policy's death benefit. Which index should he be looking at when making comparisons?
Given written consent by the commissioner
A Massachusetts producer convicted of a felony may only engage in insurance transaction after
a nonresident producer
A licensed producer who lives in another state and transacts insurance in Massachusetts is called
Coercion
A licensee who attempts to intimidate a prospective insured is guilty of
Guaranteeing benefit payments for a stated minimum number of years.
A life annuity with period certain is characterized as
Periodically purchase additional insurance.
A life insurance guaranteed insurability rider gives the insured the right, without proving insurability, to
Insured is expected to be confined to a nursing home for life
A life insurance policy that contains an accelerated (living) benefit rider will provide funds if the
Person who receives the death benefits if the primary beneficiary dies before the insured.
A life insurance policy's contingent beneficiary is the
Beneficiary receives $50,000 income tax-free
A policyowner pays the first annual premium for a $50,000 life insurance policy and dies one month after the policy effective date. Which of these statements is normally true?
21
A producer must be given how many days notice for a scheduled hearing?
2
A survivorship life insurance policy usually covers how many lives?
Replacement
A transaction in which a new life insurance policy is purchased an an existing life insurance policy is surrendered is called
Mandatory income tax withholding on the amount transferred
A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid
Reduction
ABC Company is attempting to minimize the severity of potential losses within its company. The company is engaged in risk
Written consent from the state insurance regulatory agency
According to federal fraud and false statements regulation, what is required for a prohibited person to transact insurance business in this state?
cover the cost of unexpected expenses
According to the needs approach, an emergency reserve fund's primary purpose is to
Applicant has a right to receive a copy of the report
An applicant submits a life insurance application where an investigative consumer report is used in the underwriting process. Which of these statements is true?
Church plans
An employee welfare plan exempt from ERISA regulations would be
Separate account set up by the insurer.
Assets that back the non-guarateed values of variable life insurance products are held in which account?
The stated person or entity who is designated to receive the death proceeds.
Who is the beneficiary in a life insurance policy?
State insurance departments
Who regulates an insurer's claim settlement practices?
Endorsement
Christophers is issued an insurance policy that contains an attached agreement which alters the terms of the policy. This attached agreement is called a(n)
State insurance departments
Claims settlement practices of insurers are regulated by:
Yes, because of the powers granted through state statutes.
Does the Superintendent have the ability to examine the records of authorized insurers?
Receives benefit payments at regular intervals
During an annuity's liquidation phase, the annuitant normally
Misstatement of age in the application.
During the first two years a life insurance policy is in force, the insurer may contest a policy for all of the following reasons Except.
be appointed by an authorized insurance company
In order to act as an insurance agent, a producer must hold a valid insurance license and
Eating
In order to determine an accelerated life insurance benefit, which of the following is considered an activity of daily living?
Automatic premium loan.
In the event of premium default, which life insurance provision will use the cash value to keep the policy in force?
Applicant is a substandard risk
In what situation could an insurance policy's coverage be modified?
Decreases the death benefit
In what way is a life insurance policy affected by an accelerated benefit payment?
The licensee has been afforded a right to a hearing on the charges.
No existing insurance license will be revoked until.
The gain is treated as taxable income and a penalty tax is imposed on the gain
Peter, age 50 , surrenders his modified endowment contract (MEC). How is the gain treated in terms of federal income taxes?
Fluctuate with changes in the cash account
Rick owns a variable universal life policy and chooses a variable death benefit option. What will typically happen to the death benefit as a result of this selection?
The marital deduction
Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The transfer of Rick's IRA account balance to his surviving spouse qualifies for
Remain a constant dollar amount for the duration of the annuity period
Ron recently purchased an immediate, straight life fixed annuity. His benefit payments will
Policy protection normally expires at age 65
Straight whole life insurance can be accurately describes in all of these statements Except
The policy is surrendered for less than what was paid into it
Taxable income may be the result from all of these modified endowment contract (MEC) transactions EXCEPT for
Cause of death must be from a job-related injury.
Which of the following is NOT a condition that must be met for an accidental death benefit to be paid?
Not doing a business deal after deciding it would be too risky.
Which of the following is NOT an example of risk retention?
all incidents of ownership transferred to the assignee
The absolute assignment of a life insurance policy results in
conversion of Term Life Insurance contracts.
The business of life settlements may include all of the following EXCEPT
tax deferred
The interest credited to the cash values of personally-owned non-qualified annuities is considered
Taxable as ordinary income
The interest paid during an annuity's payout period is considered
Insurance companies
The medical information Bureau consists of members from which group?
Free look period
The period during which a buyer may return a fixed annuity contract for a full refund is called the
conversion provision
The policy provision that permits an employee to change from group life coverage to an individual life policy is called the
To obtain a premium rate based on an earlier age
The reason for backdating a policy is
someone who is licensed to negotiate a life settlement contract.
The term "life settlement broker" may refer to.
Fund a buy-sell agreement
What is considered a valid reason for small corporations to insure the lives of its major stockholders?
The policy's cash value.
What is considered the collateral on a life insurance policy loan?
under $50,000, but increases annually until fully insured.
What is the face amount of a $50,000 graded death benefit life insurance policy when the policy is issued?
The initial premium is lower compared to an equivalent amount of whole life coverage.
What would be considered an advantage of purchasing term life insurance?
Producer
When a producer submits an application that discloses personal information regarding the applicant, who supplies the privacy notice?
decrease in size
When a sum of money undergoes capital liquidation, that sum will
Eye examination
When an applicant applies for a large amount of life insurance coverage, which of the following would likely NOT be an underwriting requirement?
Without requiring evidence of insurability
When an insured under a group life insurance plan in Massachusetts elects the conversion option, the new policy is issued
Whole Life
Which life insurance policy would be eligible to include an automatic premium loan provision?
Subject to license suspension or revocation
A producer found to have engaged in an unfair method of competition may be
Acts performed which are prohibited in the agency contract
A producer working for an insurance company may be personally liable for
The insurance company
After a producer is appointed, who is considered the principal?
A false statement could lead to loss of coverage
After an applicant reads and signs an insurance application, he/she should be conscious of the fact that
Level term for a stated period of time
After the extended term life nonforfeiture option is chosen, the available insurance will be
45 hours
After the first triennium, how many credit hours of continuing education is required by a licensed producer for each licensing period?
Initial premium is lower than for an equivalent amount of term insurance.
All of these are considered features of whole life insurance EXCEPT
Is expected to remain in a nursing home for life.
An accelerated (living) benefit rider in a life insurance policy may provide funds to an insured who
Fixed amount
An annuitant is paid $495 per month until the contract value is exhausted at some undetermined date in the future. Which type of annuity payout option is this?
Make tax deductible contributions to the plan
An employer that offers a qualified retirement plan (as opposed to a non qualified plan) to its employees is eligible to
Tern year term insurance for a person aged 55
when a ten year renewable term life insurance policy issued at age 45 is renewed, the premium rate will be the current rate for
Local unemployment rates
which of these is NOT relevant when determining the amount of personal life insurance needed?
An individual permanent life insurance policy
which type of policy can group term life insurance normally be converted to?
Survivorship life policy is lower
How does the cost for survivorship life policy compare to the cost of combining two separate individual life insurance policies?
6 months
How long can an insurer legally defer paying the cash value of a surrendered life insurance policy?
6 months
How long do most states allow an insurance company to delay the payment of a cash surrender under the delayed payment provision.
Misrepresenation
If a producer misleads or fails to adequately disclose the title and true nature of a policy offered to a potential insured, it may be considered
$1000
If a producer willfully violates a Massachusetts Unfair Trade Practice Law, what is the MAXIMUM administrative penalty for each violation?
Policy's face amount minus any premiums due.
If an insured dies during the grace period without having paid the premium, how much will the insurer pay?
Disclose the types of individuals or organizations that may receive a copy of the test results.
Massachusetts law requires the Human Immunodeficiency Virus (HIV) consent form to
The policy proceeds would be reduced by the outstanding loan balance.
What happens when a policyowner borrows against the cash value of his life insurance policy?
Issue a cease and desist order against the producer
When the Superintendent believes a producer has violated the law, the superintendent has the authority to
Employee benefits
When using the needs approach for life insurance planning, a lump sum may be created to provide for all of the following EXCEPT
Accelerated (living) benefit
Which benefit is normally payable to a life insurance policyowner when the insured's life expectancy has been severely limited?
Conduit IRA
Which of the following can be used to avoid the mandatory withholding tax on qualified plan distributions?
Flexible premium fixed annuity.
Which of the following contracts offer deferred taxation, flexible payments, a guaranteed interest rate, and death benefits equal to the cash value
Create new funds upon the death of a wage-earner
Which of the following is NOT an intended use of an annuity?
It must obtain a certificate of authority from the Superintendent of insurance.
Which of the following is true regarding a foreign insurer wishing to conduct business in Massachusetts?
Making a recommendation to a potential insured to replace existing coverage.
Which of the following situations would an insurance agent need to guard against liability for professional errors and omissions?
The policy can be contested by the insurer only during the first two years of the contract
Which of the following statements about the contest-ability of a life insurance policy is true?
Civil insurrections apply
Which of these is NOT a true statement of the war exclusion?
Interest payments made by a policyowner are deductible.
Which of these statements is NOT true regarding a cash value loan against a life insurance policy?
The premium to purchase the coverage comes from the policy's cash value
Which of these statements regarding the extended term insurance nonforfeiture option in a life policy is accurate?
Paid-up policy that offers lifetime protection.
Which statement best describes a single premium whole life policy?
The face amount and premiums can be changed simultaneously by the policyowner.
Which statement concerning adjustable life insurance is accurate?
The installments payment amount is determined by the total number of installments
Which statement regarding a fixed period settlement option is correct?
It indicates evidence of an employee's insurance coverage.
Which statement regarding the certificate of insurance is accurate?
Premium remains the same no matter how many children.
Which statement regarding the life insurance premium for a children's rider is true?
Cash value accumulations have a guaranteed minimum interest rate
Which statement regarding universal life insurance is correct?
The licensee
Who is responsible for reporting the licensee's change of name or address to the superintendent of the Bureau of insurance?
