Insurance Exam
"R" owns a $100,000 Whole Life policy and does not want to continue premium payments. He decides to use the policy's cash value for the Extended Term Nonforfeiture option. What will the face value of the term policy?
$100,000
Under the South Carolina insurance Fraud Act, the criminal penalty for a first offense fraudulent act that resulted in an economic gain of $3,600 is a minimum fine of ___ and up to ____ imprisonment
$2,000 and 3 years
P surrenders a life insurance policy and receives a lump some of $30,000. Premiums totaled $25,000 on the policy. How is the surrender treated for tax purposes?
$25,000 is received tax-free and $5,000 is taxed at ordinary income rates
What is the maximum death benefit payable by the South Carolina Life & Health Insurance Guaranty Association?
$300,000 aggregate
SARs rules on money laundering require you to report any suspicious transactions over
$5,000
Who has the responsibility for assuring that every policy sold is issued by an authorized company?
*Either* The producer who sells the policy or the client
From the date of the receipt of the policy, the Free Look period for an individual or Family Accident and Health or Hospitalization policy is
10 days
The Free Look provision for a Life policy is
10 days
The grace period for Individual Health and Disability policies with monthly premium payments is
10 days
The South Carolina Health Insurance Pool (SCHIP) helps residents who are forced to pay a premium rate that is ___ above the Pool rate
150%
the minimum age to hold an insurance license in South Carolina is
18 years old
A Temporary Producer License is valid for
180 days
Which of the following policies would have the fastest growth of cash value? - Level term - Straight life - 20-pay life - Decreasing term
20-pay life
During every 2 year period, a South Carolina Producer must earn at least ___ hours of Continuing Education credits
24
You must notify the Department of any change of address within ___ days or pay a fine
30
The grace period for a Life policy is
31 days
A replacing insurer is required to notify an existing insurer of a replacement within _____ days of receiving the application for the replacement policy
5
As a Producer, you are required to keep all business records for a minimum of
5 years
By law, a Health policy that covers a woman who gives birth though Cesarean delivery must provide coverage for up to
96 hours of a physician ordered hospital stay
Which of the following proposed insureds would be most suitable for the Variable Universal Life policy? - A 55 year old truck driver not willing to assume any market risk - A 30 year old professional with a professional spouse and two children - A 65 year old retired office worker - A 40 year old who wants life insurance to pay off the mortgage in case of death
A 30 year old professional with a professional spouse and two children
A person who sells insurance products without a license can face the penalty of
A fine of up to $10,000 and imprisonment for 2 years
B borrows money from a bank for home improvements. The bank strongly suggests that he purchase life insurance that will pay the loan in the event of premature death. Which of the following would best help him achieve this objective? - Level term - Increasing term - Decreasing term - Whole life
Decreasing term
Same understated his age on a Life policy application and then died 18 months after the policy went into effect. How will his death benefit be affected?
The death benefit will be reduced to the amount the premium would have purchased based on Sam's correct age
Which of the following statements is true regarding an outstanding policy loan upon death of the insured? - The policyowner, not the beneficiary, made the loan; therefore, there is no consequence to the policy - The loan, plus any interest due, is deducted from the death benefit - The beneficiary assumes the loan and makes payments - The loan, plus any interest due, is paid through the insured's estate, similar to other loans and debts
The loan, plus any interest due, is deducted from the death benefit
L is receiving Interest Only payments on the settlement of her mother's Life insurance policy. If L dies before the lump sum is paid to her, what happens to the policy proceeds?
The policy proceeds can only be paid into L's estate
Which of the following statements best describe life insurance policy dividends? - Dividends represent profits to shareholders who own stock in an insurance company - Dividends affect the costs of all insurance policies issued today - Dividends are considered a return of premiums paid by policyowners - Dividends provide policyowners with a guaranteed minimum cash inflow
Dividends are considered a return of premiums paid by policyowners
Which of the following principles states that in forming an insurance contract, both parties have a responsibility to the other? - Doctrine of Warranties - Doctrine of Representation - Doctrine of Utmost Good Faith - Doctrine of Reasonable Expectations
Doctrine of Upmost Good Faith
Which provision states that the application is part of the contract?
Entire Contract clause
During the first 12 months of effective coverage, a Disability Income policy may
Exclude coverage for a pre-existing condition
A policy has lapsed because of nonpayment of premium. It can be reinstated under certain conditions. Which of the following nonforfeiture options allows for reinstatement? - Cash surrender - Reduction of premium - Extended Term insurance - Interest only
Extended Term insurance
Assuming the following are all standard risks and all other factors being equal, which proposed insured would have the lowest premium? - Male, age 29 - Female, age 45 - Male age 51 - Female, age 29
Female, age 29
To reinstate a lapsed policy, all of the following must be met EXCEPT: - Pay a reinstatement fee - Pay all past due premium - Pay interest on past due premium - Prove insurability
Pay a reinstatement fee
If death occurs during the grace period, the insurer will:
Pay the full benefit less the overdue premium
Defamation of Character happens when you
Personally attack someone's character or reputation
Cash value in a life insurance policy belongs to the:
Policyowner
Which of the following is part of the Consideration provision? - Insured's risk classification - Insured's general health condition - Premium payments are due in advance - Benefits payable upon the insured's death
Premium payments are due in advance
All of the following are agent responsibilities toward an applicant EXCEPT: - Explain the coverage - Deliver the policy - Collect the initial premium - Prepay the initial premium
Prepay the initial premium
Insurance deals with
Pure Risk
John is an insurance Producer who was cited in an administrative action by another agency of the government for lack of child support. What does John need to do in order to stay in compliance with the Insurance Code?
Report the matter to the Department of Insurance within 30 days of final disposition
Insurance rates
Require approval from the Department of Insurance
A policyowner who wants to retain the rights of ownership should name a beneficiary as a(n)
Revocable beneficiary
J, age 35, has purchased a 20-pay life policy. When she is 55, she will:
Stop paying premiums
Which of the following is NOT required piece of information you are required to submit to the DOI in order to be issued a license? - A SLED report - A statement that you have not been convicted of a felony - or any crime that involves moral turpitude - in the last 3 years - A statement affirming that you are at least 18 years of age - Tax returns for the last 2 years
Tax returns for the last 2 years
All of the following statements about Whole Life insurance are true EXCEPT: - The face amount of the policy stays the same as long as the policy remains in force - the shorter a premium period, the faster the cash value will grow - The cash value decreases each year the policy is in force - Any outstanding loans at death will reduce policy proceeds to the beneficiary
The cash value decreases each year the policy is in force
If the insured lies about his age on a life application this means
The death benefit will be adjusted to reflect the correct age of the insured
To be eligible for a Small Employer Medical Plan, an employer must have
Between 2 and 50 employees
All of the following are true regarding insurance premiums EXCEPT: - Insurers invest premiums to earn interest - The operating expenses factor is sometimes called the "loading" factor - The cost of doing business is part of the premium calculation - By law, insurers cannot invest premiums
By law, insurers cannot invest premiums
Within 30 days after delivery, the purchaser of a replacement Life policy or Annuity contract
Can receive an unconditional refund
The results of genetic testing
Cannot be used for establishing a different premium rate
All of the following are guaranteed with Variable Life EXCEPT the: - Death benefit - Premium - Cash value - Period of protection
Cash value
A Universal Life policyowner can be assured that the contract will remain in force as long as:
Cash value is sufficient to meet each month's deductions
Variable Whole Life policies differ from Whole Life policies in that
Cash values are not guaranteed
Risk is best defined as
Chance of loss
An Adjustable Life policy allows for the policyowner to do all of the following EXCEPT: - Choose the face amount - Set the premium - Choose the period of protection - Choose the investment vehicle
Choose the investment vehicle
"R" owns a $100,000 Whole Life policy and does not want to continue premium payments. He decides to use the policy's cash value for the Reduced Paid-Up nonforfeiture option. The cash value of his new policy will
Continue to increase
In purchasing an insurance contract, the applicant must accept the contract as written. This type of contract is referred to as a(n):
Contract of adhesion
Which of the following policies would have an increased premium after a given period of time? - Straight life - Single premium whole life - 20-pay life - Convertible Term
Convertible Term
A SERP
Is totally funded by the employer
Which of the following is true regarding the Automatic Premium Loan provision? - It applies to term policies only - It is automatically included in all Life policies - It keeps the policy in force when it would otherwise lapse due to nonpayment of premium - Money used to pay premiums is treated as a partial withdrawal and not subject to interest charges or a reduction in the death benefit
It keeps the policy in force when it would otherwise lapse due to nonpayment of premium
Which of the following best describes the Common Disaster Provision? - It insures the death benefit will always be paid to the beneficiary's estate - It requires that when the insured and primary beneficiary die in a common disaster that the death benefit will be paid to the contingent beneficiary - It insures that the death benefit will always be paid to the insured's estate if the insured dies before the primary beneficiary - It requires a double death benefit to be paid to the contingent beneficiary if the insured dies by reason of accident
It requires that when the insured and primary beneficiary die in a common disaster that the death benefit will be paid to the contingent beneficiary
M and N, both insureds, purchased a life policy that will pay a death benefit when the first dies. M and N purchased a
Joint life policy
Juanita uses her family and friends as sources for leads for insurance prospects and pays them $25 per name if she sells a policy to the lead. What, if anything is wrong with this picture
Juanita is violating the regulation against sharing commissions based on completion of the sale
All of the following are factors in the calculation of dividends paid on a Life policy EXCEPT - Favorable mortality experience - Excess interest earned - Favorable operating expenses - Less interest earned
Less interest earned
All of the following settlement options pay the beneficiary principal (policy proceeds) and interest EXCEPT: - Fixed time - Fixed amount - Lump sum cash - Life income
Lump sum cash
Jeremy decided on an aggressive advertising campaign to help drum up business. In one of his pamphlets, he described a Life policy that showed cash value growth of 12% per year, but did not mention that this was a Variable Life policy. Jeremy is guilty of
Misrepresentation
In Life Insurance, we use
Mortality tables
The type of company is run for the benefit of the policyowners:
Mutual
"V" purchases a policy on October 1, 2005 and it is delivered 14 days later. The 10-day free look would expire on
October 25, 2005
Adverse selection is the tendency for
Bad risks to purchase large amounts of insurance
In order to sell insurance in South Carolina, you must meet all personal requirements, pass the state exam, submit an application, pay appropriate fees, and...
Be appointed by an admitted company
Which of the following is NOT supplied to an applicant for a replacement policy or contract within 10 days? - Information about retaining copies of sales material and the Notice of Replacement - Notification that the Producer has said that he or she left the applicant copies of sales materials and the Notice of Replacement - A toll-free number for compliance personnel - A summary of the benefits of this particular replacement
A summary of the benefits of this particular replacement
Ohio Casualty is doing regular business in Indiana. Within the state of Indiana, Ohio Casualty would be considered a(n)
Admitted company
Which of the following is NOT a consideration with the underwriting decision to accept, reject or rate a risk? - Health of the proposed insured - Age of the beneficiary - Age and gender of the proposed insured - Occupation of the proposed insured
Age of the beneficiary
Each applicant for Life insurance requires a signature of: - The proposed insured - The policyowner, if different from the insured - The agent - All of the above
All of the above
Describing a policy limitation in a positive way is
An example of deceptive advertising
Which of the following falls under the definition of a replacement policy or contract? - An existing policy whose value will be used to finance the purchase of a new policy - An Annuity contract that is transformed into a structured settlement contract - An immediate Annuities that is purchased with proceeds from an existing Annuity - Replacement of nonrenewable, nonconvertible Term Life Insurance thath will expire in 5 years or less
An existing policy whose value will be used to finance the purchase of a new policy
Which of the following statements is FALSE regarding the classification of risks? - An insurer can never reject a substandard applicant - Applicants who are preferred risks have a lower premium than standard rate risks - An applicant can be considered a substandard risk because of a dangerous occupation - A standard applicant is issued a policy with a "normal" premium without special restrictions
An insurer can never reject a substandard applicant
An insurance company that consistently forces its policyowners to institute suits to collect claims is guilty of
An unfair claims settlement practice
The South Carolina Director of the Department of Insurance is
Appointed by the Governor with the advice and consent of the Senate
All of the following are rights of the policyowner EXCEPT: - Assign the policy when an irrevocable beneficiary has been named - Name the beneficiary - Borrow the cash value - Decide how policy proceeds will be paid
Assign the policy when an irrevocable beneficiary has been named
Sally ran into some tough economic times and was not able to stay current with premium payments on her individual Life policy, so the policy was terminated. One year later, things got better and she wished she could reinstate coverage. Which of the following is NOT necessary to have her policy reinstated? -Pay all past due premiums - Provide evidence of insurability - Pay all policy loans plus interest - Fill out an entirely new application
Fill out an entirely new application
All of the following are types of nonforfeiture options EXCEPT - Fixed time - Cash - Extended Term insurance - Reduced Paid-Up insurance
Fixed time
A company chartered in Guam or Puerto Rico doing regular business in New York would be considered by New Yorkers to be a(n)
Foreign company
Ohio Casualty is doing regular business in Indiana. Within the state of Indiana, Ohio Casualty would be considered a(n)
Foreign company
All of the following statements about Universal Life are true EXCEPT: - It can be described as Renewable Term insurance with a separate value fund - The death benefit is adjustable - Premiums are flexible - Growth of cash value that exceeds the guaranteed interest rate is taxed as current income
Growth of cash value that exceeds the guaranteed interest rate is taxed as current income
R signs an application for a $100,000 policy, pays the first premium and receives a conditional receipt. If R dies in an accident four days later, which of the following is true? - The insurer could reject the application on the basis of accidental death - If R would have been approved for the policy as applied for, R's beneficiary will receive $100,000 - Because the policy had not been issued, the premium will be returned to R's beneficiary - The insurer could reject the claim because the insurer was unable to complete the underwriting process
If R would have been approved for the policy as applied for, R's beneficiary will receive $100,000
An application for insurance is submitted to the underwriting department for review. Which of the following is true? - If no conditional receipt was issued, the policy becomes effective when the agent receives it from the company - If no conditional receipt was issued, the policy becomes effective only with a Good Health Statement signed. - If a conditional receipt was issued, the policy becomes effective if approved by the underwriting department with the results of any required medical exam - If a conditional receipt was issued, the policy becomes effective whether reviewed by the underwriting department or not
If a conditional receipt was issued, the policy becomes effective if approved by the underwriting department with the results of any required medical exam
All of the following statements are correct regarding taxation of life insurance EXCEPT - Dividends are not taxable, but any interest paid on the dividends is taxable - Interest paid on policy loans is tax deductible to the policyowner - A lump sum cash payment to a beneficiary is tax free - If a policy is surrendered, the policyowner will pay tax on amounts received that exceed premiums paid
Interest paid on policy loans is tax deductible to the policyowner
All of the following statements about Universal Life are true EXCEPT: -The policyowner has the right to increase or decrease the interest rate credited to the cash value fund - The mortality costs and operating expenses are deducted from the cash value fund each month - As long as the cash value fun is sufficient to pay for the cost of insurance and operating expenses, the policy remains in force, whether or not premiums are paid - The policyowner has the right to increase or decrease the policy's death benefit
The policyowner has the right to increase or decrease the interest rate credited to the cash value fund
Which of the following meets the definition of insurable interest? - The policyowner must expect to benefit from the insured's death - The policyowner must expect to suffer a loss from the insured's death - The beneficiary must have an insurable interest in the insured - The insured must have an established relationship with the beneficiary
The policyowner must expect to suffer a loss from the insured's death
With regard to insurance, the term consideration means:
The premium and the statements on the application
A Renewable Term policy guarantees which of the following? - The right to renew up to a stated age or date regardless of health status - The right to convert at a stated age or date to permanent life insurance - That the premium will not be increased upon renewal - None of the above
The right to renew up to a stated age or date regardless of health status
Sam, who is both an Insurance Producer and a landlord, begins a promotion that offers a free Renters policy to the first 5 people who rent one of his apartments. Under what circumstances would this offer be in compliance with the Insurance Code?
This arrange can never be in compliance with South Carolina insurance law and regulations
When you purchase a Life insurance policy, you are
Transferring risk
Which of the following terms indicates that a life insurance contract contains the legally enforceable promises of only one party? - Adhesion - Unilateral - Conditional - Aleatory
Unilateral
Which of the following in NOT true about Inflation Protection in a Long Term Care policy? - It is included in the policy unless the policyowner opts out with a written statement [wrong] - It guarantees the right to periodically increase benefit levels without providing evidence of insurability - When the LTC policy is sold, the Inflation Protection benefits are illustrated with a graph or chart - It is a provision that adjusts benefits at the rate of inflation
Unknown
In the current South Carolina statutes, a person is considered a dependent if he or she is
Unmarried and younger than 19 years old
C is 25 years old. She wants to take advantage of variable interest rates and to vary her premium payments throughout the year. Which policy would you recommend?
Variable Universal Life
Which of the following policies requires a Life license and a Securities license? - Universal life - Interest sensitive whole life - Variable life - Adjustable life
Variable life
A Group Life plan can be converted to an individual Life plan
Within 31 days of termination of Group Life coverage
