Life All Questions
Which of the following statements concerning qualified retirement plans are CORRECT?
employer contributions to a qualified plan are tax deductible as a business expense employerf sponsored IRAs are considered qualified retirement plans the earnings of a qualified plan are not taxed until they are distributed
If a premium payment has not been given with the application, the policy becomes effective only when the producer delivers the policy and:
explains its provisions and obtains the initial premium and a signed statement of continued good health
An option whereby additional insurance may be purchased at various times without evidence of insurability is known as:
guaranteed insurability
All of the following are violations of Colorado Insurance law EXCEPT
informing a new policyholder that his or her new policy, if inadverently lapsed for nonpayment of premium, could be reinstated upon reapplication
Which of the following regarding the insuring clause is TRUE?
it states whom benefits should be paid it sets forth the insurer's promise to pay benefits upon the insured's death it is usually found on the first page of the policy
A principal function of annuities is to
liquidate an estate
A fraternal benefit society may sell life or accident and health insurance to
members of the fraternal society only
All of the following are premium elements EXCEPT
morality
The net premium is defined as
mortality minus interest
The annual gross premium of a life insurance policy is defined as
net premium plus expense
An agent must notify the applicant that all of the following sources will be used to assess the applicant's application EXCEPT:
personal references
Which of he following statements regarding the paid-up additions life insurance policy dividend option is NOT correct?
the paid-up additions dividend option is only available to insureds that remain insurable
Which of the following statements regarding a stock insurer are NOT true?
the policies are participating policies
A group life policy is incontestatble except for nonpayment of premium, once it has been in effect for
two years
How much may the Commissioner fine an insurer for each violation of a cease and desist order?
$10,000
The insured in a $25,000 life insurance policy died of a heart attack. Since the policy had a "double indemnity" provision, the policy beneficiary received
$25,000
Roberta is the insured in a $30,000 life insurance policy for which she pays an annual premium of $700. There is an outstanding policy loan of $2,500. Her last premium due has not been paid and she dies during the grace period. How much will her beneficiary receive?
$26,800
For each violation of a cease and desist order, the Commissioner may fine an individual
$500
At age 60, David decides to stop paying premiums on his $60,000 whole life policy and exchanges it for extended term insurance. What face value will the term insurance have?
$60,000
How many hours of the total number of continuing education hours must be in approved courses in the lines of insurance for which the producer is licensed?
18 hours
Suppose a producer holds two licenses, one to transact life insurance and another for accident and health insurance. How many hours of continuing education instruction must this producer complete within 24 months following the renewal date of the earliest license?
24 hours
Edna stopped paying premiums on her permanent life insurance policy seven years ago though she never surrendered it. She is still insurable and has no outstanding loan against the policy. The company probably will decline to reinstate the policy because the time limit for reinstatement has expired. The limit usually is:
3 years
A producer has how many days to file a written response to the commissioner after he has been terminated by his appointing insurer?
30 days
When a life insurance policy is being replaced, the replacing insurer must give the policyholder the right to return the policy for a full refund. The insurer is required to give the policyholder the right for at least
30 days
When a life insurance policy is being replaced, the replacing insurer must give the policyholder the right to return the policy for a full refund. The insurer is required to give the policyholder this right for at least
30 days
A group life insurance policyholdeer must be given how long a grace period for premium payment?
31 days
A group life insurance policyholder must be given how long a grace period for premium payment?
31 days
Which of the following period certain income options would call for the highest payment rate per $1,000 of life policy proceeds?
5 year period certain the shorter the period certain, the higher the monthly payment rate
Jessie owns a deferred fixed annuity in which the contractually guaranteed rate is 3%. The contract also has a standard current rate interest provision. If current rates are 5%, what rate of interest will be credited to Jessie's annuity?
5%
Which of the following statements regarding a traditional individual retirement account (IRA) is NOT correct?
A 10% penalty is assessed on any distribution from an IRA before the age of 59 1/2
Who is most likely to offer group credit life insurance?
A car dealership
Which of the following statements regarding the cost-of-living rider is NOT correct?
A drawback of the rider is that a drop in the Consumer Price index (CPI) can result in a decrease in the coverage previously added
Which of the following groups is least likely to be eligible for coverage through a group health plan?
A group of neighbors who wish to insure themselves and their families
the overall purpose of the USA PATRIOT ACT is to
deter terrorist activity to prevent, detect, and prosecute any persons suspected of an international money laundering and financing of terrorist activities
With regard to a breadwinner's death, the blackout period generally can be defined as
the period that begins when the youngest child is 16 and ends when the surviving parent turns 60
Willa purchases a 5-year $50,000, level term policy with an option to renew. Which of the following statements about the policy's renewability is CORRECT?
the premium for the renewal period will be higher than the initial period.
A signifiant feature of adjustable life insurance is that
the premiums may be increased or decreased from time to time by the policyowner
For a good cause, the commissioner can grant licensees an extension of how many months to complete their continuing education requirements?
12 months
For good cause, the commissioner can grant licensees an extension of how many months to complete their continuing education requirements?
12 months
The usual free look period for a life insurance policy that is NOT delivered as a replacement policy is
15 days
how many hours of the total number of continuing education hours must be approved courses in the lines of insurance for which the producer is licensed?
18 hours
Which of the following statements regarding accelerated death benefits is NOT correct?
Accelerated death benefit payments are always 100% of the death benefit.
Which characteristics of insurance contracts provides legal protection for insureds when coverages are not clearly stated in the policy?
Adhesion
A group life insurance plan participant who has been covered under the plan for 4 years terminates employment on October 1. On October 22 she dies without having made a decision whether to convert her group coverage to an individual policy. What action will the insurer take?
Assume that the deceased employee would have elected the conversion option an d pay the death benefit without regard for the deceased employee's insurability prior to death
When an insurer terminates a producer's appointment, the insurer must notify the
Commissioner and producer
Which of the following statements regarding the delivery of a life insurance policy is NOT correct?
During the delivery appointment, the agent should ask for referrals
Which of the following statements comparing group and individual lie insurance is NOT true?
Individual insurance is generally available at lower rates than group insurance
Which of the following statements best describes a Keogh (HR10) plan?
It is qualified retirement plan for self-employed individuals and their eligible employees.
Sidney, age 58, owns a deferred variable annuity that he purchased 15 years ago and into which he has paid $25,000 in the form of periodic premiums. Today its cash value is $37,000. If he dies today, which of the following statements best describes the tax treatment this transaction will receive?
Of the cash value, $25,000 is payable to the beneficiary income tax-free and $12,000 is subject to income taxation
How can an insured access all or a portion of a life insurance benefit to pay for a long-term illness or life-threatening disease?
Purchase an accelerated benefit rider
For tax purposes, retirement plans can be dived into which of the following 2 categories?
Qualified and nonqualified
Who is required to keep copies of the notice regarding replacement of life insurance, the applicant's statement and any other notification concerning replacement for at least 5 years?
Replacing insurer
Which of the following statements regarding a cost-of-living rider on a life insurance policy is NOT correct?
The cost-of-living rider adjustment is tied to the gross domestic product GDP.
If an insured does not exercise the option to increase coverage under a guaranteed insurability rider, what is the result?
The coverage will not change and the option automatically expires
Madge took out a $100,000, 10-year convertible term policy at age 30, and at age 36 decides to convert the policy to permanent insurance of the same amount on an original-age basis. All of the following statements pertaining to this situation are CORRECT
The new policy will build cash values at a faster rate than if she converts at her attained age. A higher premium will be charged for the new policy She must make up the difference in premiums for the period between ages 30 and 36
Which of the following statements pertaining to SIMPLE plans is NOT correct?
These plans are reserved for employers with 500 or more employees
How much of the prelicensing coursework in Colorado must be devoted to industry ethics?
Three hours of every 50 hour course
Arnold buys a $25,000 participating whole life policy. He has a definite need for more life insurance, but believes he cannot afford it. Which of the following dividend options would help to solve this problem automatically?
Using dividends to buy paid-up additions
When a cash value life insurance policy is converted into an annuity in a nontaxable transaction, that event is generally known as?
a 1035 exchange
All of the following statements pertaining to SIMPLE plans are CORRECT
a SIMPLE plans may be structured like IRAs or 40(1)k plans all employees are fully and immediately vested in SIMPLE plans Simple plans allow employers to set up tax-favored retirement savings plans for their employees without having to comply with complicated qualification requirements
An alien insurance company is incorporated in
a country other than the US
An individual may purchase a life insurance policy on all of the following persons
a dependent a spouse a business partner
An insurer that issues participating policies is
a mutual insurer
An individual may purchase a life insurance policy on all of the following persons EXCEPT
a neighbor
Withdrawals from a universal life policy
do no require repayment
When appropriate, the Colorado commissioner of insurance reports a violation of insurance law to
an appropriate district attorney
All of the following may be done to determine insurability in regard to AIDS EXCEPT
asking questions regarding the applicant's sexual orientation
The commissioner gives approval to an insurer to do business in Colorado in a certificate of
authority
All of the following policyowner rights contribute to the flexibility of a life insurance policy EXCEPT
classification of the applicant
Paul is a single father with two young daughters. He has decided to give up his two favorite hobbies--skydiving and race car driving--because they are risky pursuits that could lead to his premature death. This method of dealing with risk is called risk:
risk avoidance
A license is the legal property of the
state of Colorado
Betty purchased a universal life insurance policy when she was 61. Upon her 66th bday she recieved sizable inheritance, paid an exceptionally large annual premium and in doing so violated the 7 pay test. the following year, hoping to correct the situation, she made no premium payment so that the averagge premiums paid were less than the 7 pay test averageed. Today the policy's cash value stands at $45,000 and her basis in the contract is $28,000. If she were to withdraw $30,000 from the policy's cash value, which of the following best describes the tax treatment this transaction would relieve?
$13,000 of the distrubition is tax-free, but $17,000 is subject to income taxation
Which of the following statements pertaining to reinstatement of a life insurance policy is NOT correct?
A suicide exclusion period is renewed with a reinstated policy
Which of the following insurance companies is owned by its policyholder?
Mutual life insurance company
Which of the following satements about the differences between individual and group life insurance is CORRECT?
The cost of group life insurance is generally lower than individual insurance
Which of the following statements pertaining to inspection reports on life insurance applicants is NOT correct?
They provide information obtained principally from law enforcement officials
How much of the prelicinsing coursework in Colorado must be devoted to industry ethics?
Three hours of every 50 hour course.
An alien insurance company is incorporated in
a country other than the United States
The commissioner gives approval to an insurer to do business in CO in a certificate of
authority
Conventional Life Insurance
is classified as a fixed product with a specific (guaranteed) benefit
A frateernal benefit society may sell life or accident and health insurance to
members of the fraternal society only
Calculating premium rates for life insurance is based on 3 elements
mortality (1 of the 3 types of hazards; physucal, moral, morale) interest expenses
In order to be valid, a group life insurance policy
must cover at least 3 people on the date of issue
Many of the basic protections associateed with qualified employer plans can be traced to
the Employee Retirement Income Security Act
Typically a contract for a group life insurance is issued to
the employer
Which of the following differentiates a variable life product from a conventional life product?
the fact that the product has a seperate account which is distinct from the general account.
The loaded premium is
the gross premium
Under a group life plan, eligible dependents of an insured employee could include all of the following EXCEPT
the insured's in-laws ... they would need to be financially dependent upon the insured.
A license is deemed to be used for controlled business if during any 12 month period
the licensee's total premiums on controlled business exceeded the total premiums on all other business
What are accelerated benefits?
Life insurance death benefits paid before the death of an insured with a terminal illness
Josie has been totally disabled for 2 years. During that time, the insurancce company has paid all premiums (a total of $1,200) on her $25,000 life policy, which has a waiver of premium clause. If Josie dies now, the inurance will pay a death benefit of
$25,000 The waiver of premium rider only waives the policyowner's responsibility of paying the life policy premiums if she suffers a disability and is unable to work after 90 days. The waiver of premoum only waives the policyowner's responsibility to pay; it doesnt accelerate any portion of the death benefit to the insured.
Michelle, age 31, just purchased a $50,000 variable life insurance policy. With regard to her policy, which of the following statements is NOT correct?
The death benefit of $50,000 is not guaranteed
Which of the following statements about accelerated living benefits is NOT correct?
The proceeds must be spent on the insured's medical expenses
In addition to the department of Insurance, who has the authority to regulate variable life insurance?
The securities exchange commission
How can the cash value accumulation in a straight whole life insurance policy be accessed while the insured is living and while keeping the coverage in force?
Through a policy loan
The death benefit proceeds of a life insurance policy are protected from the beneficary's creditors unless
they are paid out a lump sum
For a waiver of premium rider to become operative, the insured must be
totally disabled
A group life policy is incontestable, except for nonpayment of premium, once it has been in effect for
two years .. once it has been in effect for two years the policy's validity may not be contested for any reason other than the insured's failure to pay premiums
All of the following statements about debtor group life insurance are correct EXCEPT
when the insured dies, the policy proceeds are awarded to the insured's estate
Suppose a producer helps a client set up an estate plan, which is not part of the producer's usual service. The producer can charge a fee for this service under all of the following circumstances EXCEPT
when the producer always planned to sell insurance to the client
All of the following are duties of the commissioner EXCEPT
writing insurance laws
Which of the following statements pertaining to the spendthrift clause in a life insurance policy is NOT correct?
A beneficiary recieves $125 per month from a life policy under the fixed-amount settlement option and a spendthrift clause. The beneficiary may have the company send the payments to a creditor to pay off a debt
Which of the following would be subject to replacement regulations?
A new policy that causes an existing life insurance policy to be surrendered
Which of the following policyholders may request that the Commissioner examine an insurer because they fear the insurer is unsound or insolvent?
At least 5 policyholders who have at least $100,000 insurance in force and who have specified their concerns in writing.
What type of annuity payment option provides a guaranteed income to the annuitant for life and, if the annuitant dies before the annuity is depleted, a lump-sum cash payment to the annuitant's beneficiary?
Cash refund option
The commissioner may
Conduct investigations and subpoena witnesses whenever he or she deems necessary.
Suppose a producer writes a majority of his insurance business on the employees and officers of a restaurant owned by his wife. This kind of insurance business is defined as
Controlled business
Madge took out a $100,000, 10-year convertible term policy at age 30, and at age 36 decides to convert the policy to permanent insurance of the same amount on an original-age basis. All of the following statements pertaining to this situation are correct EXCEPT:
Conversion will be contigent upon her evidence of insurability
Which of the following statements concerning qualified retirement plans is NOT correct?
Employer contributions to a qualified plan on behalf of its employees are taxable income to the employees when they are made.
Which provision of a life insurance policy states that "no statement shall void this policy or be used in defense of a claim under it unless contained in the application"?
Entire contract clause
Jessica has a Roth IRA which of the following statements is TRUE?
Her IRA contributions are not tax deductible.
Malia purchases a $50,000 5 year level term policy. Which of the following statements about Malia's coverage is NOT correct?
If Malia dies after the specified 5 years, only the policy's cash value will be paid.
Winston, the insured, and his wife, Irene, his sole beneficiary, both died in a hotel fire. Hospital physicians witnessed that Irene lived at least two hours longer than Winston. The life policy had no common disaster clause. Which of the following will likely receive the policy proceeds?
Irene's estate
Spendthrift Clause
Is designed to protect the proceeds of a life insurance policy from the beneficiary's spending habits and creditors. When this clause is includeed in the policy, the creditors cannot attach the death benefit proceeds before they are made to the beneficiary. Once the beneficiary has received the proceeds, however, the creditors can take steps to attach those proceeds. Since a lump-sum settlement would immediately place all of the proceeds in the beneficiary's possession, the proeeds would not be protected from the beneficiary's creditors.
Which of the following statements regarding the mortality rate is NOT correct?
It is used in the determination of health insurance rates
Which of the following regarding the insuring clause is NOT true?
It is usually signed by the insured.
Which of the following statements does NOT describe a fixed annuity?
It will produce income benefits that are adjusted to keep pace with inflation
Carl and Laura receive $270 per month under a joint and two-thirds survivor life policy settlement option. What would happen if Carl died within a year after payment started?
Laura would recieve $180 per month as long as she lived
Which of the following statements regarding the estate tax treatment of life insurance owned by the insured at the insured's death is NOT correct?
Life insurance that is owned by the insured will avoid estate tax inclusion as long as ownership is transferred to another party at least 1 year before the insured's death.
What annuity payout option provides for lifetime payments to the annuitant but guarantees a certain minimum term of payments, whether or not the annuitant is living?
Life with period certain
To supplement their income in their senior years, Harold purchased a fixed immediate annuity at age 65, naming his wife Lucy as the joint annuitant under a joint and 50% survivor annuity payout option that pays the couple $1,000 per month. If Harold were to die today, which of the following statements would be CORRECT?
Lucy would continue receiving monthly benefits of $500 for the remainder of her life
Norris is the primary beneficiary of a life insurance policy. He dies after receiving $275 per month for six years, under a 10-year period certain income option. His son, Neil, is the secondary beneficiary. Which of the following statements pertaining to this situation is CORRECT?
Neil will receive income checks in the same amount as his father for 4 years.
Susan, the beneficiary on John's $500,000 life policy, chose life-only as her settlement option. Susan recieved 5 years of settlement checks from the insurance company, totaling $150,000. How much will Susan's beneficiary receive upon her death?
Nothing, because life-only states that when the beneficariy dies, any remaining death benefits is kept by the insurance company
Which of the following is NOT a type of agent authority?
Obvious
Which of the following statements regarding a deferred compensation plan is CORRECT?
The employee agrees to forgo part of his current income until a specified future date, typically retirement, and may use life insurance as the funding vehicle for the plan.
Which of the following statements pertaining to a whole life policy is NOT correct?
The face amount may be paid as a lump sum at the policyowner's selected retirement age.
Which of the following statements regarding accelerated death benefits IS correct?
The inability to perform activities of daily living (eating, dressing, bathing, etc.) is considered a qualifying event. A written disclosure must be given to the applicant explaining the effect on various aspects of the policy An insured may request an accelerated death benefit payment if death is expected within 24 months due to terminal illness
Under what condition may an insurer refuse benefits to the beneficiary of an insured who committed suicide?
The insured committed suicide within the first year of the policy's effective date
Which of the following statements about reinstating an individual life insurance policy is CORRECT?
The insured must pay all back premoums with interest premium loans before the policy can be reinstated
Tammy owns a participating whole life insurance policy for which she has elected the paid-up additions option. If the insurer declares a dividend of $500 in the current year, how will this amount be used with this dividend option?
The insured uses the $500 as if it were a single premium to purchase a unit of paid-up whole life insurance based on Tammy's attained age.
Which of the following statements pertaining to the suicide clause in a life insurance policy IS correct?
The suicidde clause stipulates a period of time during which benefits will not be paid if the insured commits suicide. The suicide clause is designed to protect the insuring company An insured committed suicidde on February 1. The insured has a $50,000 life insurance policy, which was issued January 28 two years previously/ The $50,000 death benefit was paid to the beneficiary of the policy. Suicide clauses typically extend 2 years, during which time the insurer will not have to pay benefits if the insured does, in fact, commit suicidde. The insuring company is obligated to retur the premiums paid. In this situation, the insured commited suicide 9 days afte rthe clause time period expired; therefore, the insurer must pay the the benefits to the beneficiary.
With a participating life insurance policy, a policyowner may do all of the following with dividends received EXCEPT:
Use the dividends to pay overdue premiums from previous years
When an insureer terminates a producer's appointment, the insurer must notifiy the
commissioner and producer
Leland elects to surrender his whole life policy for a reduced paid-up policy. The cash value of his new policy will
continue to increase
All of the following are violations of Colorado insurance law EXCEPT
informing a new policyholder that his or her new policy, if inadvertently lapsed for nonpayment of premium, could be reinstated upon reapplication
All of the following insurance practices are illegal in Colorado
inquiring about an applicant's sexual orientation in connection with an application soliciting or procurring insurance without a licensee paying a fee for services as an insurance producer to anyone who is not properly licensed.
Carlos and Jenna both work to support their family. To provide the same amount of life insurance protection in the event either dies, they should consider purchasing which of the following plans?
joint life
Delivering policies in person gives the agent an opportunity to do all of the following EXCEPT:
make last minute changes to the policy
When he was 45, Frank purchased a $40,000 5 year level term policy. when he died at age 52, his beneficiary recieved
nothing... he died after his term policy period had expired.
Variable Life Products
provide insurance and benefits that vary according to the investment experience of the underlying accounts. These underlying accounts, which are separate accounts the insurer establishes and maintains, are typically are made up of equities such as stocks, the values of which rise and fall and cannot be guaranteed. A purchaser of a variable life policy incurs a degree of risk not associated with a fixed whole life policy.
An insurance company that pays dividends from a source other than profits is
subject to a maximum fine of $1,000
Under an executive bonus plan, the amount of premium paid is
taxable income for the employee
An annuity has 2 phases:" the annuitization phase and
the accumulation or pay phase
A mortality table reflects
the average number of deaths that will occur during a given year for a given age group of individuals
during the accumulation period of a deferred variable annuity, the value of the individual account rises or falls based on
the investment results
If both an older and younger person had annuity funds of the same amount and simultaneously began to receive monthly life payments, which individual would receive the LARGER payments?
the older person
All of the following are standard life insurance dividend options EXCEPT
using the dividend to increase the base whole life policy's face amount
Denise, age 52, has a straight whole life policy and decides to stop paying premiums and take a paid-up policy for a reduced amount. Her paid-up policy will be
whole life
To be licensed to sell both life and accident and health insurance in colorado, an applicant must complete
100 hours of prelicensing education
The free look, or right to examine provision allows a policyowner the right to review and then return a policy for a full refund within no less than how many days?
10 days
Which of the following life insurance policies with the same face value would have the highest premium if issued to the same person?
10 year renewable and convertible level term
When appropriae, the Colorado Commissioner of Insurance reports a violation of insurance law to:
An appropriate district attorney.
Which of the following statements pertaining to the suicide clause in a life insurance policy is NOT correct?
An insured with a $75,000 life insurance policy issued Dec 15 commits suicide two years later, on December 24th the beneficiary of the policy will recieve a return of the premiums paid for the policy
Which of the following statements regarding 1035 exchanges is NOT correct?
Annuity to life insurance transfers are tax-free
A prospect with a young family needs affordable whole life insurance. As a rising young executive, it is likely that the prospect's current limited resources will increase substantially over the next 15 years. Based only on this information, what type of whole life insurance variation would you recommend?
Modified Life. Premiums are generally lower in the first years of the policy and higher in later years. This type of policy is designed for persons with limited financial resources who have the promise of higheer resources in later years. The total over the period of the policy would be equivalent to the straight whole life policy.
Who is required to keep copies of the notice regarding replacement of life insurance, the applicant's statement, and any other notifications concerning replacement for at least five years?
Replacing insurer
Self-insurance is an example of what kind of risk treatment?
Retention
Susan, age 52, withdrew $5,000 from her traditional individual retirement account, which consisted entirely of pretax contributions, to purchase her first home. What are the tax consequences?
Susan will not be assessed the 10% penalty on her early withdrawal.
All of the following events are allowable reasons to take an early withdrawal from an IRA and not pay a tax penalty EXCEPT
purchase of a vacation home
All of the following events are allowable reasons to take an early withdrawal from an IRA and not pay a tax penalty
qualifying medical expenses disability death
If a producer offers to refund part of a prospect's premium in exchange for the purchase of an insurance policy, the producer is committing the illegal act of
rebating
All of the following insurance practices are illegal in Colorado EXCEPT
replacing one life insurance policy with another
Making appropriate product recommendations based on the needs, objectives, and circumstances of a client is referred to as
suitability considerations
Which section of the application should contain a record of any injury the applicant may have suffered?
the medical section
Juan names his sister, Silvia, as the beneficiary of his $250,000 life insurance policy. At Juan's death, if Silvia chooses to have the proceeds paid over time, rathe rthan in lump sum,
the original death benefit is not taxable; however, interest earned is taxable as ordinary income to Silvia
Life Insurance proceeds are included in the gross estate if
the proceeds are payable to the insured's estte or the insured had any incidence of ownership in the policy at the time of death or transferred ownership within 3 years of death.
For which of the following types of policies would premiums be invested in an insurer's seperate account?
variable annuities
