Insurance

Lloyds of London

not an insurer, but a society of members who underwrite insurance in syndicates

the investment gains from a universal life policy usually go toward

the cash value

When does a life insurance contract become effective if the initial premium is not collected during the application process?

when producer collects initial premium and delivers policy

An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?

when the conditions of the receipt are met

K pays on a $20,000 20-year endowment policy for 10 years and dies in a car accident. How much will the insurance company pay the beneficiary

$20,000 death benefit

which statement is true regarding a minor beneficiary

normally, a guardian is required to be appointed in the beneficiary clause of the contract

If a producer chooses to conduct business under an assumed name, when must notification be given to the Commissioner?

prior to using the assumed name

an immediate annuity consists of a

single premium

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

45

Three law partners from 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

contestable period

A period during which an insurer can challenge the validity of a life insurance policy, by reviewing coverage for any misrepresentation during application process.

C is a key employee at ABC Incorporated. If a key employee life policy is purchased on her life, which of these statements would be true?

ABC is the policyowner, C is the insured, and ABC is the beneficiary

what is not true about underwriting process

AIDS and HIV exams can be conducted in a discriminatory fashion

a policy loan is made possibly by which of these life insurance policy features?

Cash value provision

From what point must the insurer pay interest on the proceeds of a death claim?

Date of death

How are Roth IRA distributions normally taxed?

Distributions are received tax-free

Incontestability Clause

Ensures insurance company cannot contest statements made in insurance application after certain period of time

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

If toms employment is terminated, 20% of the funds would be forfeited

Which of the following statements regarding the Notice Regarding Replacement of Life Insurance is CORRECT

a copy of the notice must be reviewed and signed by both the policy applicant and beneficiary

which of these require an offer, acceptance, and consideration?

contract

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 misstatment of age is discovered

Credit life insurance is typically issued with which of the following types of coverage

decreasing term

S is close to retiring and would like to purchase a policy that will yield greater gains than bonds, but will still protect the principal with a minimum level or risk. Which product would S be advised to purchase?

equity index insurance

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

free-look period

D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary's receive?

full face amount

A nonforfeiture clause gives the policyowner

guaranteed values even if the policy has lapsed

When may the Commissioner issue an emergency cease and desist order?

if there is suspicious of an unauthorized person engaging in insurance business without being licensed

W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices except:

immediate annuity

when must insurable interest exist for a life insurance contract to be valid?

inception of the contract

a policy of adhesion can only be modified by whom

insurance company

Employer noncontributory group life policies must allow for all of the following EXCEPT

insured can determine the benefit amount

if the insured and primary beneficiary are both killed in the same accident and it cannot be determined who died first, where are the death proceeds to be directed under the uniform simultaneous death act

insured's contingent beneficiary

which of these needs is satisfied by adjustable life insurance

insured's need for flexible premiums

to be valid, a group life insurance policy

may not be issued to a group formed solely for the purpose of obtaining insurance

a policyower is allowed to pay premiums more than once a year under which provision

mode of premiums

which of these products is not considered interest sensitive

modified whole life

T is covered by an Accidental Death and Dismemberment (AD&D) policy that has an irrevocable beneficiary. What action will the insurance company take if T requests a change of beneficiary?

request of the change will be refused

What is the suicide provision designed to do

safeguard the insurer from an applicant who is contemplating suicide

S recently received a $500,000 lump sum retirement buyout from her employer. She would like to buy an annuity that will immediately furnish her with a guaranteed income for life. What type of annuity is best suited for her situation

single premium

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

survivorship

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

Term Life Policies that have the ability to be converted to permanent coverage may do so during a specific time period. This conversion period

varies according to the contract

the commissioner may issue an emergency cease and desist order without a hearing for all the following except

writing controlled business

Which of the following is an example of defamation

A brochure including an untrue statement regarding a competitor's ability to pay claims

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

0%

all of the following statements about traditional individual retirement accounts are false EXCEPT

10% penalty is applied to withdrawals before age 50.5

In Colorado, a life insurance applicant has ____ days after policy delivery for a full refund of premium if not satisfied for any reason

15

Before a life policy is issued, which of these contract elements is necessary

a signed application by the prospect

cost of living rider gives the insured

additional death benefits

B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of

additional whole life coverage at specified times

The amount of monthly disability benefits payable under social security is affected by whihc of the following factors

amount of benefits available from other sources

which premium schedule results in the lowest cost to the policyowner

annual

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

the automatic loan premium provision is designed to

avoid a policy lapse

K owns a whole life policy. If K wants an increasing death benefit to protect against inflation, which dividend option should she chose?

paid-up additional insurance

which statement is TRUE in regards to a policy loan

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

all of the following statements are true regarding a policys grace period except

past due premiums are waived

what is true in regards to policy loans

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

which of the following provisions guarantees that premiums will be waived if a Juvenile Life policyowner becomes disabled

payor clause

Which of these characteristics is consistent with a Straight life policy?

premiums are payable for as long as there is insurance coverage in force

P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year period. What type of policy should P purchase?

Family maintenance policy

which of the following potential insurance sales would be subject to replacement regulations

a new policy that causes an existing life insurance policy to be surrendered

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

corporate executive

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

when insurable interest exists

what type of insurance offers permanent life coverage with premiums that are payable for life

whole life

a return of premium life insurance policy is

whole life and increasing term

which of the following statemetns regarding the notice regarding replacement of life insurance is correct

a copy of the notice must be signed by the applicant and submitted with the application

indemnify

compensate for loss, damage, or injury; reimburse; repay

Which information is NOT included in the Co supplement to the summary of benefits and coverage form?

insurer's prior year financials

Q applied for life insurance and submitted the initial premium on Jan 1. The policy was issued Feb 1, but it was not delivered by the agent until February 7. Q is dissatisfied and returns the policy Feb 13. How will the insurer handle this situation

policy was returned within the free look period and premium will be fully refunded

the ______ is authorized to assign a life insurance policy as collateral for a loan

policyowner

what is the basic function of an annuity

the systematic liquidation of accumulated funds

An insurer cannot deny a claim unless

there is a reasonable explanation of the claim

how long must a replacing insurer maintain the records of a replacement transaction?

5 years

what is the purpose of a policy summary

It highlights the critical parts of the policy issued

Which statement regarding third party ownership of a life insurance policy is true?

It is extensively in estate-planning as well as business circumstances

Stranger Owned Life Insurance (STOLI)

a large policy acquired by a group of investors with the specific intention of selling the policy in the secondary life insurance market and ultimately making a substantial profit when the insured dies

which of the following statements is correct regarding insurable interest in a life insurance contract

a persons generally is considered to have an unlimited insurable interest in himself or herself

Which of the following is CORRECT regarding a producers fiduciary responsibility with client funds?

a producer may never commingle personal funds paid by or to a client

A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following?

aviation exclusion

whose life is covered on a life insurance policy that contains a payor benefit clause

beneficiary

Variable Whole Life Insurance can be described as

both an insurance and securities product

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

deducted when the policy is discontinued.

Variable annuities may invest premiums in each of the following EXCEPT

insureres corporate business account

in a life insurance contract, an insurance companys promise to pay stated benefits is called the

insuring clause

which type of insurance beneficiary require his/her consent when a change of beneficiary is attempted by the policyowner

irrevocable beneficiary

When a claim has been denied, the insurer must

issue a statement to the policyowner explaining the coverage, provision, or laws on which denial was based

K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable?

level

A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the

policy loan provision

which of the following actions is NOT possible with a universal life policy

premiums may be applied as a credit against income tax

Nonforfeiture Options

provision included in certain life insurance policies saying that the policyholder will not forfeit the value of the policy if the policy lapses after a defined period of time due to nonpayment

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

rating services

which of the following is required for a life insurance Lapse notice

reason stated why the policy will lapse

if a producer offers to refund part of a prospects premium in exchange for the purchase of a life insurance policy, the producer is committing the illegal act of

rebating

Which of the following is an example of a nonforefeiture option?

reduced paid up option

A statement made by an insured in an insurance application that must be true to the best of one's knowledge and which becomes a part of the contract is known as

representation

Interest on life insurance proceeds is

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

what is an example of rebating

returning a portion of a premium as inducement to purchase insurance

The consideration clause in a life insurance policy indicates that a policyowners consideration consists of a completed application and

the initial premium

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

the insured's total loan value

level premium indicates

the premium is fixed for the entire duration of the contract

under a renewable term policy

the renewal premium is calculated on the basis of the insured attained age

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 replacement for 5 years

an individual who purchases a life annuity is given protection against

the risk of living longer than expected

insolvent

unable to pay debts owed

A variable annuity has which of the following characterisics

underlying equity investments

In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?

unilateral

A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached

waiver of premium

On June 1, 2004, G takes out a $20,000 whole life insurance policy with an accidental death and disemberment rider. On July 15, 2005 G intentionally overdoses on sleeping pills and takes her own life. What will G's beneficiary receive as a death benefit

$20,000

what kind of insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability

convertible term

A whole life insurance policyowner does not wish to continue making premium payments. Which of the following enables the policyowner to set the policy for more than its cash value

life settlement contract

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

tax-deductible to the employer

T cash surrenders a recently-issued whole life policy. He also requests that the proceeds be payable to an unrelated third party. T would likely be red-flagged for violation of

anti-money laundering rules

A life insurance applicant realized he failed to disclose material medical history and calls the producer. Any changes made to the application must be initialed by the

applicant

The accidental death and dismemberment provision in a life insurance policy would pay additional benefits if the insured

became blinded in an accident

which of these is NOT considered to be a cost connected with an individuals death

business expense

Company XYZ offers a group Term Life insurance plan to its employees. What does each employee covered under this plan receive?

certificate of insurance

which of these is NOT a source of funding for social security benefits

federal government

all of these statements about the waiver of premium provision are correct EXCEPT

insured must be eligible for social security disability for claim to be accepted

Which of these is NOT an element of Life insurance premiums

morbidity rate

What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100

whole life

upon request, when must the Colorado Supplement to the SUmmary of benefits and coverage form be provided

within 7 business days

a company that has not been authorized to operate in Colorado is known as a

nonadmitted insurer

What type of life insurance are credit policies issued as?

term

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 purchased a $100,000 single premium, Straight Life annuity 5 years ago. He has received monthly payments since the inception of the annuity. If T dies, the insurance company

does NOT have to pay any further payments

Whole life insurance is sometimes referred to as "straight life". what does the word "straight" indicate when using this phrase

duration of premium payments

The underwriting process involves all of these except

policy loan

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

typically a life insurance death benefit is paid by a lump-sum payment. An _____ option is a method of distributing a life insurance policy's death benefit OTHER than by a lump sum payment

settlement

which of the following life insurance policies combine term insurance with an investment element

universal life

life insurance immediately creates an estate upon the death of an insured. Which of the following policies is characterized by a guaranteed minimum death benefit

variable life

S owns a life insurance policy with cash values that fluctuates according to the underlying investment performance of common stocks. Which of these policies does S own

variable whole life

when a misrepresentation on a life insurance policy application is discoered, what action may a insurance company take

void the policy only if it is discovered during the contestable period and proven to be material

The part of a life insurance policy guaranteed to be true is called

warranty

which of the following statements about accumulated interest earned on divendends from an insurance policy is true

taxed as ordinary income

Which of the following is TRUE if the owner of an IRA names their spouse as beneficiary, the then dies before any distributions are made

the account can be rolled into the surviving spouses IRA

which of the following statements is correct about an agent who is taking an insurance application

the agent should have the applicant initial any changes made on the application

surplus

the amount of an asset or resource that exceeds the portion that is utilized

all of these concepts about equity indexed life insurance are correct EXCEPT

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

T applies for a life insurance policy and is told by the producer that the insurer is bound to the coverage as of the date of the application or medical examination, whichever is later. Assuming that T is an acceptable risk, what item is given to T?

conditional receipt

K purchased a Life insurance policy in 1986 which paid 10% interest in the early years of the policy. Twenty years after the purchase, she received a notice from the insurer stating that the policy will soon terminate unless a much-higher premium is paid because of falling interest rates. This type of policy is known as a(n) _________ life policy.

universal

What type of life insurance incorporates flexible premiums and an adjustable death benefit?

universal life

when funds are shifted straight form one IRA to another IRA, what percentage of the tax is withheld

none

upon delivery of a rated life insurance policy, the producer must obtain each of the following EXCEPT

signed HIPPA disclosure

what is an example of a misrepresentation

describing a universal policy as a security

T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this?

life annuity with period certain

The consideration clause of an insurance contract includes:

the schedule and amount of premium payments

what is the max amount the commissioner can fine an insurer for each violation of a cease and desist order

$10,000

an producer who violates a cease and desist order may, after a hearing, be fined up to

$500

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

Certificate of authority

group life insurance policies are generally written as

annually renewable term

paying insurance premiums on a more frequent basis will causes the policy to have

higher premiums

How are the policyownder dividends treated in regards to income tax?

interest on accumulations is taxed

In CO, which of the following is true regarding the commingling of an insured fund with the funds of the producer

it is never ok

A producer license may be suspended or revoked if the producer is found to be engaging in

misrepresentation

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 statement is correct regarding the premium payment schedule for the whole life policies

premiums are payable throughout the insured lifetime/coverage lasts until death of the insured

Colorado's replacement rules apply to all of the following types of insurance EXCEPT

single premium whole life

If a producer is found to be writing primarily controlled business,

the commissioner will not renew the license

K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however, the check was never signed by the applicant. If the application is approved, when will coverage be effective?

the date the agent delivered the policy, collected the initial premium and obtained a good health statement from the insured

what is the underlying concept regarding level premiums

the early years are charged more than what is needed

All of the following statements regarding a tax sheltered annuity (TSA) are true except

Income derived from the TSA is received income tax-free

Why must an insurance applicant answer all questions on the applications

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

when a minor is designated as the sole primary beneficiary,

a guardian will be court-appointed in the event of a death claim

what action will an insurer take if an interest payment ona policy loan is not made on time

automatically add the amount of interet due to the loan balance

the automatic premium loan provision is desgined to

avoid a policy lapse

all of the following are considered a form of advertisement EXCEPT

communication or materials used within a insurer's own organization

which of the following is NOT a problem when existing life insurance is replaced with new coverage

comprehensive coverage may increase under the new policy

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

A 45-year old women won $100,000 in a scratch off lottery ticket. She purchased an annuity that will pay her $1500 per month beginning at age 60. Which of these annuities did this women purchase

deferred fixed annuity

When recommending the purchase or exchange of an annuity, a producer must determine the suitability of the purchase by performing all of the following except

determining the marital status of the applicant

Which of the following is an important underwriting principle of group life insurance?

everyone must be covered in the group

which of these statements describe a Modified Endowment Contract

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

When an insurer issues a policy that refuses to cover certain risks, this is referred to as a

exclusion

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 the

expense charges

which of the following nonforfeiture options offers the highest death benefit

extended term

P has recently signed an application for insurance. The insurer MUST advise her in writing that an investigative consumer report may be conducted according to the

fair credit reporting act

Stranger-Owned Life Insurance (STOLI) is when a person purchases life insurance only to sell to an

third party with no insurable interest

the common disaster clause provides that if both the insured and the sole named beneficiary were to die in a common accident, which of the following is true

this clauses provides the payment of proceeds ot the insured's estate

The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured original age is

to cost

what type of life insurance incorporates flexible premiums and an adjustable death benefit

universal life

which parts of a life insurance policy are guaranteed to be true

warranty

if an annually application was not taken in person, an insurer must provide the applicant a Buyers Guide

within 5 business days of the insurer receiving the application