Life

What is the maximum civil penalty that can be imposed for a single cause of license suspension, revocation or denial?

$10,000 A civil penalty of up to $10,000 may be levied against a producer per cause of license suspension, revocation or denial.

Producer J brokered $2,000,000 in insurance premiums last year. Based on this premium amount, what is the penalty (face) amount of the surety bond J is required to maintain in favor of the people of Illinois?

$50,000 A producer who is required to maintain a surety bond must hold a bond in the amount of $2,000 minimum or 5% of the previous year's brokered premiums, whichever is the greater amount up to a $50,000 penalty amount maximum. 5% of $2,000,000 equals $100,000 but the maximum bond required is $50,000.

If the Director sends a representative to an insurance company office to conduct a nonfinancial conduct examination, at which of the following days and times would the insurer be compelled to give the Director easy and convenient access to all the company records?

9 AM Monday morning The examination law says any person being licensed must grant the Director or his/her representative access at all reasonable hours, which would include any weekday during normal business hours.

Which of the following activities on the part of an insurance producer would likely be construed as rebating?

A producer offers two tickets to the Super Bowl game in exchange for the purchase of a large life insurance policy. Rebating is exchanging something of value to help close the deal on an insurance purchase and the something of value is not part of the insurance contract. Super Bowl tickets would be considered as rebating in this case.

All of the following insurance placements would be considered controlled business, EXCEPT:

A producer places a property insurance policy on the home of his uncle Controlled business pertains to insurance written on the life, property or risks of the producer, their spouse or their employer.

If a group is contributory, what percentage of members must be insured by the policy? A: 75% B: 50% C: 100% D: 0%

A: 75% In a Contributory group, the employer and employees share responsibility for paying group premiums and 75% of employees must be included in the policy.

A producer's duty to educate the client on the product, determine their needs and evaluate cost or relative plans is called: A: Analysis and Suitability B: Whole Life C: Term Life D: None of the Above

A: Analysis and Suitability The producer's duty to help a client address all their needs is known as analysis and suitability.

G lost her husband a few years ago. G has been receiving benefits through social security, but she has just been informed she will not receive any more money until retirement because her youngest child has attained age 16. This is known as the: A: Blackout Period B: Elimination Period C: Probationary Period D: Loss of Income Period

A: Blackout Period When a surviving spouse loses their monthly survivor benefit and before they would receive retirement is known as the blackout period. No benefits are paid by social security during the blackout period.

An agreement that uses life insurance to fund a business ownership change is known as: A: Buy/Sell Agreement B: Key Person C: Social Security Survivor D: Survivor Protection

A: Buy/Sell Agreement A buy/sell agreement uses life insurance to fund a business owner change should an insured business owner die.

Written defamation is known as A: Libel B: Slander C: Rumor D: Twisting

A: Libel It is libel when unfounded written statements are made to intentionally injure the reputation of another.

An emerging marketplace in which an insured can sell their policy for more than their cash value, but less than the policy face value while they are still alive is known as: A: Life Settlements B: Viatical Settlements C: Annuity D: Cash Refund Options

A: Life Settlements Life Settlements allow an insured to sell their policy for more than the surrender value and less than the face amount. There are many situations in which an insured would consider life settlements including, divorce, loss of job, retirement, and sale/termination of a business.

An insured drops the health policy she has had for many years because producer J told her that all health conditions are covered even though that is untrue. Producer J has engaged in A: Misrepresentation B: Twisting C: False Advertising D: Defamation

A: Misrepresentation Communicating false, untrue or misleading information to an insurance consumer by a producer is an act of misrepresentation.

Which of the following is the term for when the group sponsor is responsible for paying all the premiums in a group life policy? A: Non-contributory B: Contributory C: Credit life D: Group Life

A: Non-contributory In a Non-contributory group policy, the sponsor is solely responsible for paying all group life premiums.

$250 every two years is the license renewal fee for which of the following? A: Non-resident producer B: Resident producer C: Temporary producer D: Reinstatement

A: Non-resident producer Non-resident producers are required to pay $250 every tow years to maintain their license in Illinois.

What is the concept behind terminating the producer license of a convicted felon? A: Serious criminal activity, as evidenced by a felony conviction, is a indication that the producer is no longer trustworthy and represents a threat to the public which the Director is duty bound to protect against. B: The producer will no longer be able to maintain the license because of incarceration. C: The producer is no longer able to properly service existing clients. D: People who commit criminal acts should be punished for their crime and not allowed to continue to earn commissions in the insurance industry.

A: Serious criminal activity, as evidenced by a felony conviction, is a indication that the producer is no longer trustworthy and represents a threat to the public which the Director is duty bound to protect against.

The regulation that specifies an agent's duty to ensure that a prospective buyer receive the best plan/coverage for the client's need is: A: Solicitation B: Replacement C: Advertisement D: Guaranty Association

A: Solicitation Life Solicitation rules stipulate an agent's duty to recommend the best product/plan for the proposed insured's need.

All of the following are qualifications that apply to a non-resident producer in Illinois, EXCEPT: A: The non-resident must be licensed in their home state for a minimum of 2 years before Illinois will grant non-resident producer status. B: The non-resident must file an affidavit naming the Director to receive service of process on the non-resident's behalf. C: There is a $250 license fee due and payable every two years. D: The non-resident producer must be in good standing in their home state with reference to their resident producer status.

A: The non-resident must be licensed in their home state for a minimum of 2 years before Illinois will grant non-resident producer status. There is no requirement that a non-resident must meet some minimum licensing experience, other than holding a license in good standing their home state prior to granting non-resident licensing status is Illinois.

An employee of an insurance company is instructed by her superior to enter false information in the official company records pertaining to financial matters of the firm. Which of the following statements is true concerning this action? A: This is the unfair trade practice of falsifying records and it is a felony action. B: This is an example of restraint of trade between two insurance companies punishable by loss of certificate of authority. C: This is an example of twisting which is a felony. D: This is the unfair trade practice of falsifying records and it is a misdemeanor action

A: This is the unfair trade practice of falsifying records and it is a felony action. Intentionally falsifying insurance company records to deceive financial status is an unfair practice and those who engage in the activity are guilty of a felony offense.

D has just paid off his mortgage and has decided that he no longer needs his life insurance policy which he originally purchased to cover the house payments should he die. If D explores the possibly of selling his policy while he is still alive, it is known as: A: a life settlement B: an annuity C: a Viatical settlement D: STOLI

A: a life settlement Life Settlements allow an insured to sell their policy for more than the surrender value and less than the face amount. There are many situations in which an insured would consider life settlements including, divorce, loss of job, retirement, and sale/termination of a business.

Under Illustration Regulation, an illustration must be provided at: A: application B: delivery C: premium payment D: None of the Above

A: application Illustrations must be supplied at application by the producer.

IRA contributions: A: are made in cash and tax deductible B: are made in cash and are not tax deductible C: grow with interest, but interest is taxed D: are available to anyone younger than 59 1/2.

A: are made in cash and tax deductible IRA contributions, when made in cash, are tax deductible. Interest grows on a tax deferred basis and all withdrawals are taxed.

Who is the policy owner in Group Life Insurance? A: group sponsor B: the insureds C: certificate holder D: stock holders

A: group sponsor

People working with insurers who belong to the following organizations are exempt from licensing, EXCEPT: A: the president of a life insurance company who is paid commission directly from the sale of an insurance policy. B: an employer's association C: an advertising consultant D: a marketing consultant

A: the president of a life insurance company who is paid commission directly from the sale of an insurance policy Any person who is paid by commission directly from the sale of an insurance contract must hold the appropriate producer licensing authority..

Company A is replacing a policy that was written ten years ago by Company B. Company A is: A: the replacing insurer B: the existing insurer C: A direct-response sale D: the applicant

A: the replacing insurer Because Company A is replacing Company B's coverage, Company A is the replacing insurer.

The age limit for contributing money into an IRA is: A: age 59 1/2 B: age 65 C: age 70 D: age 70 1/2

Age 70 1/2 is when an individual must stop making contributions into an IRA and withdrawals must start in April after reaching 70 1/2

Which of the following best describes taxation of annuities?

An annuity grows tax deferred and then taxes are paid on any income earned upon pay out.

Each of the following is a requirement for a Life, Health, Property and Casualty prelicensing course, EXCEPT:

An exam proctored by a course provider must be successfully passed before a prelicensing course is successfully completed. Each of the four main lines of licensing authority: Life, Health, Property and casualty require 20 total course hours of which 7.5 must be classroom hours.

A producer violates the written order from the Director pertaining to their market conduct activities. What is the maximum civil penalty that can be assessed by the Director against a producer in this circumstance? A: $10,000 B: $20,000 C: $50,000 D: $100,000

B: $20,000 Any person who violates, or aids or abets the violation of, a written order of the Director pertaining to market conduct examination, is subject the possible suspension revocation or denial of license in addition to a civil penalty maximum of $20,000.

A producer is served with a Cease and Desist Order for unfair competition and he violates the Order. The statutory fine for this action is A: 500 B: 1000 C: 2000 D: $100 per day up to a maximum of $5,000.

B: 1000 Ref. 5/431 stipulates a $1,000 fine for violating the Cease and Desist Order of the Director relating to unfair marketing practices.

How many classroom hours are required for a casualty insurance prelicensing course? A: 5 B: 7.5 C: 12.5 D: 20

B: 7.5 Each of the four main lines of licensing authority: Life, Health, Property and casualty require 20 total course hours of which 7.5 must be classroom hours.

All of the following are not allowed under advertising regulations EXCEPT: A: Ads that state the policies are limited B: A genuine testimonial by a celebrity endorser C: An ad implying that a government entity approves the policy D: State that dividends are guaranteed on a television commercial

B: A genuine testimonial by a celebrity endorser Testimonials and endorsements by any third party endorsers must be factual and genuine. The remaining answers are examples of what is not permitted by advertising laws.

Which of the following criminal activities is most likely to lead to the termination of a producer's license? A: A misdemeanor DUI (Driving Under the influence). B: Embezzlement while employed part-time as a bookkeeper. C: Littering on the public highway. D: Trespassing on a neighbor's yard.

B: Embezzlement while employed part-time as a bookkeeper. Embezzlement is a serious crime of theft which will result in a felony conviction while all of the other examples given in the answer section are not severe enough to warrant felony charges.

L is caught improperly using notes at her state insurance licensing examination. What action is likely if L applies for a producer license? A: Her license will be suspended upon issuance. B: Her license request will be denied. C: She will be issued a license but put on immediate probation. D: She will be arrested.

B: Her license request will be denied.

Under Life Solicitation Rule, the definition that applies to a consumer that is most concerned about cash value buildup is referred to as: A: Life Insurance Net Payment Cost Index B: Life Insurance Surrender Cost Index C: Policy Summary D: Cash Dividends

B: Life Insurance Surrender Cost Index Under Life Insurance Surrender Cost Index which explains cash surrender value over 10 or 20 years, is important when cash value is of primary importance to the policyholder.

F wants to pay a policy off for life in one payment. F's agent warns him that by doing this he creates a MEC. What is a MEC? A: Modified Endowment Clause B: Modified Endowment Contract C: Mid Eastern Conference D: Main Endowment Contract

B: Modified Endowment Contract A MEC or Modified Endowment Contract is when the insured pays a policy completely off faster than 7 payments.

The purpose of the MEC 7 pay test is to: A: Prevent insureds from buying life policies. B: Prevent insureds from building cash values quickly to gain tax deferred interest while limiting taxes on withdrawals. C: Kill the Single Premium life market because it was too expensive for policyholder. D: Prevent insurance companies to write policies as they see fit

B: Prevent insureds from building cash values quickly to gain tax deferred interest while limiting taxes on withdrawals. The purpose of the 7 pay test is to determine if a policy is a MEC which prevents insureds from building cash value so fast they are allowed to take money out of the policy with interest and pay little to no taxes on any gain.

All of the following are examples of a tax qualified plan EXCEPT: A: IRA B: ROTH IRA C: Keogh Plan D: ESOP

B: ROTH IRA A Roth Individual Retirement Account (ROTH IRA) is an example of a NON-qualified plan because after tax dollars are used to fund the account.

An insured is covered by a Key Person policy and dies. Who are the proceeds paid to? A: The insured's selected beneficiary B: The business who insured them C: The insured's estate D: A trust of the insured

B: The business who insured them If a Key person dies, the business that insured them is the beneficiary of the policy.

In an individual life policy, which of the following best describes federal income tax consequences of premiums and proceeds? A: The premiums are tax deductible and the death benefit is subject to federal income tax. B: The premiums are not tax deductible and the death benefit is not subject to federal income tax. C: The premiums are not tax deductible and the death benefit is subject to federal income tax. D: The premiums are tax deductible and the death benefit is not subject to income tax.

B: The premiums are not tax deductible and the death benefit is not subject to federal income tax In an individual life policy, premiums are not tax deductible and proceeds are paid tax free.

All of the following are examples of Viatical settlements EXCEPT: A: a insured who is diagnosed with a terminal illness sells their policy to a licensed provider. B: a 76 year old insured retires and decides to sell his policy C: a insured who suffers a terrible fall and is told that they will die within 1 year, and sells her policy before death D: All of the Above

B: a 76 year old insured retires and decides to sell his policy A Viatical Settlement allows a terminally ill and/or injured insured (less than 2 years to live) to sell all or a portion of their proceeds before they die. While Life Settlements are similar, they do not require the insured to be terminally ill to sell ownership rights.

Under tax laws dividends on a participating policy are received: A: fully income taxable B: fully tax free C: estate taxable D: only half received tax free

B: fully tax free Since dividends are over payment of premium, they are received tax free from a participating policy.

X who holds no insurance licensure of any kind asks his neighbor Y, if Y is happy with his property insurance on his house and that X would be happy to help Y secure a better policy at a lower cost. X A: is guilty of a felony and will go to prison for 5 or more years if convicted. B: has committed a misdemeanor violation that could result in a prison term of up to 1 year. C: is just trying to be helpful and has violated no laws in Illinois. D: can avoid any possibility of criminal prosecution as long as X does not follow through with the offer and never mentions the idea again.

B: has committed a misdemeanor violation that could result in a prison term of up to 1 year. Anyone who sells, solicits or negotiates insurance in Illinois is guilty of a Class A misdemeanor which can result in a jail sentence of up to one year. X has solicited the sale of an insurance product without a license to do so.

According to many state laws, Viatical Settlement Providers: A: can be anyone in the country who can afford them B: must be appropriately licensed to transact such business C: must have at least one representative 16 years or older D: are barred from entry into the market

B: must be appropriately licensed to transact such business A Viatical Settlement Provider must be obtain a specific license to transact such business in most states.

Generally, Viatical Settlement benefits are received: A: As taxable income B: tax free C: subject to long term capital gains taxation D: None of the Above

B: tax free A Viatical Settlement allows a terminally ill and/or injured insured (less than 2 years to live) to sell all or a portion of their proceeds before they die. Generally, Viatical Settlement benefits are received tax free, but it is always best to consult a tax advisor.

The most important concept about fiduciary duty for an insurance producer is A: to tell the insured truthful statements at all times. B: to be honest and to forward premiums collected to the insurer in a prompt manner. C: to deliver all policies to insureds within 60 days of receipt by the producer. D: to act responsibly when dealing with the public the preponderance of the time.

B: to be honest and to forward premiums collected to the insurer in a prompt manner A fiduciary is expected to be honest in all business dealings and a producer must forward all premiums collected to company in a prompt time frame.

If a producer is convicted of a felony in what manner is the Director informed?

By the producer. A producer has a duty under law to report any felony conviction to the Director within 30 days of the entry date of the judgment of the felony conviction.

What is the total fee a producer must pay to reinstate a lapsed license within the allowed statutory period? A: $180 B: $250 C: $360 D: $500

C: $360

Which of the following is an example of replacement? A: A client keeping a policy and deciding not to buy a new one B: A client building up a whole life policy and converting it to a reduced paid up policy. C: A client having 25% of their cash value borrowed and selecting a new term policy in place of the current policy D: An insured renewing their term coverage

C: A client having 25% of their cash value borrowed and selecting a new term policy in place of the current policy

Which of the following policies are exempt from replacement regulation? A: A term policy that is convertible that expires in 6 years. B: A whole life policy that has 25% of its cash value loaned C: A variable life policy D: A policy that is surrendered

C: A variable life policy Of all the listed answers, Variable life is the only situation that is exempt from replacement regulations. All of the other listed answers are policies that are defined by replacement regulation.

Under Social Security, when do dependent parent survivor benefits begin? A: age 59 1/2 B: whenever the insured dies, regardless of age C: Age 62 or older D: age 25

C: Age 62 or older Dependent parent survivor benefits under social security begin at age 62 or older.

Company A has a partnership with Company Z. There is an agreement in place that if the CEO of either company were to die, the other company would receive money to buy out the partnership. This is an example of: A: Buy/Sell Agreement B: Crosse Purchase plan C: Business Entity Plan D: Key Person

C: Business Entity Plan Since two separate companies have an agreement for a buyout on an entity and not a individual level it is known as a business entity plan.

H wants to buy a policy to accumulate cash value while he is alive. Under life insurance needs analysis/suitability, H is looking for: A: Providing cash to meet final expenses B: Income Replacement C: Cash Value Buildup and Liquidity D: Estate Creation A: Providing cash to meet final expenses B: Income Replacement C: Cash Value Buildup and Liquidity D: Estate Creation

C: Cash Value Buildup and Liquidity Because H wants to build cash value and be able to use that money if needed while he is alive that is a cash value buildup and liquidity need.

Each of the following is true regarding a Key Person policy EXCEPT: A: The business is the owner of the policy. B: The business is premium payor. C: The insured's family receives 50% of the proceeds. D: Key person is a way for businesses to make up the financial loss of a very important worker.

C: The insured's family receives 50% of the proceeds. In Key Person insurance, the business is the policyholder and the employee is the insured. The business is the beneficiary and receives all of the proceeds.

When a licensed producer solicits the sale of an insurance policy, which of these actions is NOT required? A: The producer must identify themselves by name. B: The producer must disclose the name of the company for whom they are soliciting the insurance sale. C: The producer must disclose their home address upon an insurance sale solicitation D: The producer must identify the name of the firm they represent

C: The producer must disclose their home address upon an insurance sale solicitation A producer is not required to reveal the address at which they reside to a prospect for an insurance sale.

K is 21 years old and is buying a policy. Since K is in perfect healthy and has good family history, he will be able to buy a lot of coverage for a low premium cost. This is an example of purchasing a policy to: A: Protect an estate B: Pay final expenses C: To immediately create an estate D: To build cash value and take loans later

C: To immediately create an estate A young, healthy insured purchasing a lot of life insurance for a low cost is an example of immediate creation of an estate.

Which of the following policies are regulated under FINRA compliance? A: Whole Life B: Annuities C: Variable Life D: Term Life

C: Variable Life Variable life policies are regulated under the Financial Industry Regulation Authority (FINRA) and an agent must be licensed in life and securities to market Variable products.

H has just been diagnosed with a terminal illness and has been approached by a company to sell half of his proceeds to them while he is still alive in exchange for immediate cash payment. This transaction is known as a(an): A: Annuity B: Life Settlement C: Viatical Settlement D: Lottery winner

C: Viatical Settlement A Viatical Settlement allows a terminally ill and/or injured insured (less than 2 years to live) to sell all or a portion of their proceeds before they die. Generally, Viatical Settlement benefits are received tax free, but it is always best to consult a tax advisor.

All of the following is correct about a Buy and Sell Agreement EXCEPT: A: It uses life insurance to fund a ownership change in the event of an insured dying. B: Premiums are not tax deductible. C: When an insured owner dies, the surviving spouse can sue the living owner to reclaim ownership. D: If two business fund a partnership agreement it is known as an entity plan.

C: When an insured owner dies, the surviving spouse can sue the living owner to reclaim ownership. Once a Buy/Sell agreement is reached, if an owner dies, the surviving family cannot sue the living owner for business control.

Defamation occurs when A: a producer demonstrates that the premium rates for an insurance plan he is promoting is less expensive than the plan a competitor is promoting. B: an insurance company advertises that their industry rating is better than 99% of all other carriers in the country. C: an agency prints and distributes flyers claiming that a competitor will soon be filing bankruptcy and they are a better choice therefore with whom to do business. D: The President of a life insurance company signs off on a plan to advertise for prospects in a state his company is not licensed in.

C: an agency prints and distributes flyers claiming that a competitor will soon be filing bankruptcy and they are a better choice therefore with whom to do business. Stating a licensed entity is about to be in financial trouble to induce the public to steer away from them is an act of defamation by the maker of such statements.

In order for an insurer to be able to justify a premium price difference between insureds, the company must demonstrate to the Director that A: prior approval for such action has been granted by the Department of insurance B: such actions have been accepted in at least one other jurisdiction. C: the cost differences are based on sounds actuarial principles of risk assessment. D: the company has a waiver from the US Department of Insurance Practices to do so

C: the cost differences are based on sounds actuarial principles of risk assessment. All premium pricing must be based on proven and acceptable mathematical principle and if not, would otherwise constitute the unfair trade practice of unfair discrimination.

The time in which a participating policy must begin to surplus out is by A: the end of the grace period B: the end of the first policy year C: the end of the third policy year D: the end of the fifth policy year

C: the end of the third policy year Participating policies must begin to pay surplus out by the end of the third policy year.

Which of the following policy death benefit amounts would not warrant an illustration for a product that may normally require one? A: $40,000 B: $30,000 C: $20,000 D: $10,000

D: $10,000 In policies with $10,000 or less death benefit, an illustration is not required.

All of the following are excluded under advertising regulations EXCEPT: A: Marketing materials created by the insurer for agent use only B: A general announcement about new group enrollment C: A producer answering a policyholder's question that does not urge a client to modify coverage D: A producer explaining that a senior's policy is endorsed by the federal government

D: A producer explaining that a senior's policy is endorsed by the federal government A producer cannot imply that benefits are endorsed by government agencies. All of the remaining answers are excluded from advertising regulations.

G has suffered a life altering heart attack and is allowed to use some of her death benefit to pay for medical bills. Which law allows this scenario? A: Replacement B: Advertising C: Long Term Care Rider D: Accelerated Benefit

D: Accelerated Benefit Under Accelerated Benefit law, an insured may receive 75% of their death benefit for a qualified condition such as a heart attack in which the insured will never recover

Which of the following are elements of a Viatical Settlement? A: The viator must be terminally ill and/or injured and have less than two years to live. B: Benefits are received tax free, but it is always best to consult a tax advisor. C: Viatical providers must be licensed to transact such business by state law. D: All of the Above

D: All of the Above A Viatical Settlement allows a terminally ill and/or injured insured (less than 2 years to live) to sell all or a portion of their proceeds before they die. Generally, Viatical Settlement benefits are received tax free, but it is always best to consult a tax advisor. Viatical providers are subject to state law and must carry a designed license to transact such business.

Which of the following are exemptions under life solicitation rule? A: Credit Life B: Annuities C: Variable Life D: All of the Above

D: All of the Above Credit Life, Annuities, and Variable life policies are all exemptions under Life Solicitation Rule.

Which of the following are possible situations where a life settlement may occur? A: an insured sells their portion of a business they own and no longer need their policy B: an insured who purchased a policy to cover their mortgage in case of untimely death has just made their last mortgage payment C: a recently divorced couple who do not have children decide there is no reason to have life insurance on each other anymore D: All of the Above

D: All of the Above Life Settlements allow an insured to sell their policy for more than the surrender value and less than the face amount. There are many situations in which an insured would consider life settlements including, divorce, loss of job, retirement, and sale/termination of a business.

Which of the following is required to be listed in an illustration? A: Age and sex of proposed insured B: Initial death benefit C: Dividend option of non-guaranteed elements D: All of the Above

D: All of the Above Illustrations require the name, age, and sex of the insured, initial death benefit and any non-guaranteed dividend options projected.

Producer H is spreading vicious rumors about an insurance agency across town intending to hurt this agency's reputation. Producer H is guilty of which of the following unfair practices? A: False Advertising B: Twisting C: Misrepresentation D: Defamation

D: Defamation Any licensed person who intentionally uses verbal or written communication to harm another licensed entity is guilty of defamation.

All of the following are CORRECT about replacement regulations EXCEPT: A: the purpose of replacement is to protect the insured B: information must be factual and not misleading C: the insured must receive information to make a decision in their best interest D: None of the Above

D: None of the Above All of the answers are the purpose of replacement and therefore there are no false answers listed.

All of the following is required to be on an illustration EXCEPT: A: name of insurer B: name and address of the producer C: generic name of the policy D: Notice Regarding Replacement form

D: Notice Regarding Replacement form The name of the insurer, agent and generic name of the policy are all required to be in an illustration.

An individual life insurance application must bear the name and signature of which of the following entities? A: The Director of Insurance B: An officer of the insurance company. C: The underwriter of the policy application. D: The licensee who solicited and wrote the application.

D: The licensee who solicited and wrote the application. State law requires certain insurance applications to bear the name and signature of the soliciting producer on the application.

A producer is violating the rule against controlled business if they write too much insurance business on the risks of all of the following persons, EXCEPT: A: themselves B: their spouse C: their own business D: their parents

D: Their parents Controlled business pertains to insurance written on the life, property or risks of the producer, their spouse or their employer.

Which of the following is CORRECT about Individual Retirement Accounts? A: They are available to anyone as long as they have a life insurance policy and they want to save for retirement. B: The individual covered under the account can make contributions past age 70 1/2. C: Contributions have to be made by credit card and are not tax deductible. D: There is a tax penalty of 10% if an individual takes money out of an IRA prior to age 59 1/2

D: There is a tax penalty of 10% if an individual takes money out of an IRA prior to age 59 1/2. An IRA allows any individual with earned income to make tax deductible contributions in cash to save for retirement up until age 70 1/2. All withdrawals are taxed, however, if an individual takes money out prior to age 59 1/2 there will be taxes plus a 10% penalty on withdrawals.

A situation in which a terminally injured insured can sell their existing life insurance proceeds before they die in exchange for funds is known as a: A: Life Settlement B: Cash Surrender C: STOLI D: Viatical Settlement

D: Viatical Settlement A Viatical Settlement allows a terminally ill and/or injured insured (less than 2 years to live) to sell all or a portion of their proceeds before they die. Generally, Viatical Settlement benefits are received tax free, but it is always best to consult a tax advisor.

Under which of the following circumstance can the Director cancel the right of an insurance company to hire producers under the temporary License for Producer Application authority? A: If the producers hired under this authority sell, solicit or negotiate the sale of insurance. B: If the producers hired under this authority receive commissions for the sale of insurance products. C: When 25% or more of a company's temp license holders fail to pass their state licensing exam within one year. D: When, during any six months period, more than half of a company's temp licensees fail to obtain their full producer license within the 90 day licensing period.

D: When, during any six months period, more than half of a company's temp licensees fail to obtain their full producer license within the 90 day licensing period. At least 50% of 90 day temp licensees must continue to become fully licensed (pass the sate exam, pay the fee and have the producer license in hand) within the 90 day period or the Director may cancel this authority of an company.

All of the following are valid examples of a life settlement EXCEPT: A: a 76 year old insured is retiring and wants to sell a policy for extra living expenses B: a married couple has decided to divorce and would like to sell their policies for extra funds for their children's education C: an insured has just lost their job and wants to sell part of their life policy to help make ends meet D: an insured has just been diagnosed with a terminal illness and wants to sell the policy to help pay medical bills

D: an insured has just been diagnosed with a terminal illness and wants to sell the policy to help pay medical bills Life Settlements allow an insured to sell their policy for more than the surrender value and less than the face amount. There are many situations in which an insured would consider life settlements including, divorce, loss of job, retirement, and sale/termination of a business. When an insured sells a policy due to terminal illness it is known as a Viatical Settlement.

Life Settlements are: A: situations in which a terminally ill insured sells their policy while they are alive for immediate cash payment before they die B: the same as STOLI considering there is intent to sell a life policy when purchasing it C: transactions in which a deceased policyholder sells their death benefit for more than the cash value but less than the face amount D: transactions in which a living policyholder sells their death benefit for more than the cash value but less than the face amount

D: transactions in which a living policyholder sells their death benefit for more than the cash value but less than the face amount Life Settlements allow an insured to sell their policy for more than the surrender value and less than the face amount. There are many situations in which an insured would consider life settlements including, divorce, loss of job, retirement, and sale/termination of a business.

If an insured leaves a group they are allowed to convert their group coverage to an individual policy within ______ days. A: 30 B: 15 C: 40 D: 31

D:31

A producer must be licensed in securities to sell any of the following policies EXCEPT:

Equity Index To sell an Equity Index Policy a securities license is NOT needed because of the floor rate guarantee of the policy.

Which of the following is CORRECT about policy delivery?

Extra premium on a rated policy will be collected upon delivery. Upon deliver any extra premium due for a rated policy must be collected.

Which of the following statements about continuing education requirements for non-resident producers is TRUE?

If the state the non-resident lives in does not require non-resident producers to complete CE requirements, Illinois will not require CE of the non-resident. Illinois is a reciprocal state which means our requirements will match the requirements another state has toward their non-resident producers,

The provision or clause in an insurance policy which defines the insurance company's promises to the insured is the:

Insuring Agreement The Insuring Agreement is where the promises made by the insurance company to the insured are listed.

F is in the underwriting process for her policy. She gets a notice that the insurer will be interviewing her family about her. The insurer is performing a(an):

Investigative Consumer Report An Investigative Consumer Report is a type of credit report that allows the insurer to interview family and friends about the insured lifestyle and/or habits.

All of the following statements regarding the 90 day temporary producer license for Producer Application are accurate, EXCEPT:

It can be renewed one time for an additional $50 fee. The 90 temp license is a once in a lifetime opportunity and renewal is not allowed.

When is the earliest point life coverage could possibly begin?

It depends on when the premium was paid If a premium is paid from the start of application, initial consideration takes place and coverage could begin from that point. If no premium was paid, no coverage would exist until underwriting established guidelines for issuance.

Last year D moved to Illinois from another state where D held a producer license but it was revoked due to violating a regulation in that state? What outcome is likely if D applies for a producer license in Illinois.

It is unlikely D will receive a producer license because any person who commits an act which would lead to a license revocation in Illinois is not qualified. A person is unqualified for a producer license if they engage in any action that is grounds to suspend, revoke or deny a license in this state.

What action must the Director take toward the subject of a completed market conduct examination? A: Allow the subject at least 30 days to request a hearing. B: Notify the person examined of the contents of a verified report before it is made public. C: Issue a final written order immediately if any code violation is found during the examination. D: Any violation will result in a civil fine ranging from $1,000 to $50,000.

Notify the person examined of the contents of a verified report before it is made public All subjects of a market conduct examination must be notified of the contents of a written report and afforded the opportunity for hearing on the matter to object to the contents therein.

Which party has the responsibility of making sure an application is filled out accurately and completely?

The Agent It is the agent's duty to make sure that a policy is filled out correctly and to the best knowledge of the insured.

Each of the following is true regarding a HIPAA consent form EXCEPT:

The HIPAA form is in force for 36 months and can be used unlimited amounts of time by the insurers for any purpose they would like. Although a HIPAA form is good for 36 months, there are limits and definitions of when and how the insurer may use medical information on the insured

All of the following statements pertaining to a surety bond and an association are true, EXCEPT:

The association must be in existence for at least 7 years An association must have been in existence for at least 5 years in order to purchase a surety bond in their own association name.

If a producer demands a hearing to challenge the reasonableness of a license suspension, when will the hearing take place?

The hearing takes place within 20 to 30 days from the date the Director's mailing of the hearing notification. No less than 30 nor more than 30 days from the mailing of the notice by the Director to the producer of the hearing.

Which of the following actions on the part of a producer could lead to license denial?

The producer signed an insurance application on behalf of the applicant with the applicant's full knowledge and verbal permission to do so A producer is never allowed to sign an insurance application on behalf of an applicant or proposed insured because such an action constitutes forgery, punishable by termination of license plus a fine.

An insurance company places funds into a producer Premium Fund Trust Account for the purpose of returning the money to an insured. Within how many days must these funds be credited to the account of the insured?

Within 15 days. All credit balances from returned premiums must be credited to the insured's account within 15 days of receipt by a producer from an insurer.

Defamation , under the Illinois insurance code, is an example of

an unfair trade practice. Defamation is an unfair trade practice because those who engage in the practice are trying to eliminate competition by injuring the reputation of another licensee.

The Director

is appointed by and serves at the pleasure of the Governor. In Illinois, the position of Director of Insurance is by appointment by the Governor to serve for any length of time the Governor deems appropriate.

If behavior suggests a company is engaging in conduct that is hazardous to its financial wellbeing and insolvency may be at issue, the Director has the power to

issue a Cease and Desist Order before a hearing has been held on the matter.

The best way to summarize the controlled business law is that the producer

must sell more insurance to strangers than they do to themselves, their spouse or to their employer. The controlled business law is concerned about producers selling insurance mostly to themselves, their spouse or to their employer.

All of the following are requirement to reinstate a lapsed producer license, EXCEPT:

the continuing education requirement is waived. Complying with the continuing education requirement is required in order to reinstate a lapsed producer license.

All of the following disbursements from a Premium Fund Trust Account are legally allowed, EXCEPT:

the payment of rent for the insurance agency. Legal disbursement do not include normal overhead expenses; the PFTA may not be used a general operating account.