Life and health insurance exam

Which of the following describes an employer that agrees to pay an employee a stated amount of income beginning at retirement rather than paying them the money now? A. Deferred compensation plan B. Executive bonus plan C. Buy sell agreement D. Key person coverage

A. Deferred compensation plan - this benefits the employee because the money is not taxable until the employee actually receives it. In return, the employee agrees to work for the employer until retirement so it also benefits the employer

Sometime an individual or business has an exceptionally large or specialized risk that no authorized insurer can or will cover. in this case they may call A. A surplus lines insurance company B. An admitted insurance company C. An independent agent D. A fraternal insurance company

A. Excess or surplus line are highly specialized insurance coverages

Which of the following statements about flexible policies is NOT correct? A. Flexible policies are temporary insurance B. Policy owners can change their premium or death benefit with an adjustable life insurance policy C. A universal life insurance policy is cash-value driven rather than premium-driven D. Policy owners cannot know in advance what their flexible policies' values will be

A. Flexible polices are temporary insurance

Which of the following is a guarantee that at specified ages, dates, or events, the insured may buy additional insurance without a medical exam? A. Guaranteed insurability B. Return on Premium C. Accidental death D. Waiver of premium

A. Guaranteed insurability - Guarantee that at specified ages, dates, or events, the insured may buy additional insurance without a medical exam

In life insurance contracts, when must insurable interest exist? A. Only at the time the policy is purchased B. At the time the policy is purchased and at the time the loss occurs C. Only at the time that the loss occurs D. It does not need to exist in life insurance contracts

A. Only at the time the policy is purchased

Whole life insurance is often referred to as? A. Permanent insurance B. Level insurance C. Term insurance D. Less expensive insurance

A. Permanent insurance

Agency is a relationship in which one person is authorized to represent and act for another person or for a corporation. In insurance, the insurane agent acts on behalf of the A. Principal B. Insured C. Claimant D. Adjuster

A. Principal

The amount of money paid by an accidental death benefit rider if the insured dies in an accident is referred to as the A. Principal sum B. Principle sum C. Capital sum D. Capitol Sum

A. Principal sum

Jill is filling out an insurance application with information that she believes to be true. This information that she is providing is considered a? A. Representation B. Misrepresentation C. Material Misrepresentation D. Warranty

A. Representation

A type of insurance owned by the federal government that is not typically available from other private insurers' is called A. Residual market insurance B. Surplus lines insurance C. Private insurance D. Government funded insurance

A. Residual market insurance (war risk, flood insurance, nuclear insurance, federal crop insurance, and nuclear energy liability insurance)

Since he lives in a good neighborhood and across the street from the fire stations, Jeff decides to cancel his fire insurance policy. This is an example of which risk management method? A. Retention B. Avoidance C. Transfer D. Control

A. Retention - by not carrying fire insurance, jeff is retaining the risk of financial loss from an unexpected fire

A risk that bears the same health, habits, and occupational characteristics as the persons on whose the mortality table was based upon is knows as a A. Standard Risk B. Preferred Risk C. Substandard Risk D. Declined Risk

A. Standard risks - represent average exposures and fall into the normal range

Alberta is concerned that if she became totally and permanently disabled, she would not be able to pay her life insurance premiums and the policy will lapse. Which type of rider should she consider to protect against this possibility? A. Waiver of premium rider B. Accidental death and disability rider C. Disability income rider D. Payor Rider

A. Waiver of premium rider - waives the premiums on alberta's policy if she becomes disabled

All of the following are examples of an insurable interest EXCEPT A. sue would like to buy a life insurance policy on her spouse B. Tom would like to buy life insurance on his best friend C. Amy would like to buy life insurance policy on her business partner D. Michael and Megan would like to buy a life insurance policy for each of their children

B - Spouses, children, close family members, and business partners are all examples in which insurable interest exists. A neighbor or a best friends would not be an example of an insurable interest

Emily has chosen to receive the payout from her husband's life insurance policy so that she will receive an income for the next 15 years. At the end of that time, the entire proceeds from the policy will have been paid out. Emily has selected A. Interest-only option B. Fixed-period option C. Fixed amount option D. Life income option

B. Fixed period options

Which of the following is NOT included in the general form of the insurance application A. Type of policy and face amount being applied for B. Height and Weight C. Occupation and business address D. Beneficiary

B. Height and Weight

Which of the following types of insurance has premiums that are due weekly and are collected in person by producers who go door to door? A. Term life insurance B. Industrial life insurance C. Permanent life insurance D. Home service life insurance

B. Industrial life insurance - the face amounts are usually small - $2000 or less and are often bought simply to help pay burial expenses. This is the only policy that you will learn about that has weekly premiums

Which whole life policy allows for a lifetime of premiums to be paid in a shorter period of time such as 10 or 20 years? A. Continuous Premium whole life B. Limited pay whole life C. Single premium whole life D. Modified premium whole life

B. Limited-pay whole life

The number of individuals who dies each year at a given age is also known as A. Morbidity B. Mortality C. Actuaries D. Expenses

B. Mortality

Pam owns a l year term policy. at the end of the year, she may purchase another identical policy without showing proof of insurability. Pam's policy is A. Convertible term B. Renewable term C. Increasing Term D. Decreasing Term

B. Renewable term - may be renewed at the end of a specified period without proof of insurability. the renewal is for the same term of the time as originally purchased

Which of the following rider is increasing term insurance that always equals the total premiums paid during the time the policy is in effect? A. Guaranteed insurability B. Return of Premium C. Accidental death D. Waiver of premium

B. Return on Premium - increasing term insurance that always equals the total premiums paid during the time the policy is in effect

The section of the application that includes information regarding the proposed insured's physical condition, medical history, and alcohol and drug use is know as A. first part - general information B. Second part - health information C. The entire application D. Attending physician's statement

B. Second part - Health information -> Height, weight, tobacco use, drug use, medications, high risk hobbies, family health conditions, international travels, history of disability claims and medical treatments is some of the information included in the second-part of the application

The distinguishing feature of a variable policy is that all of the earnings depend on the investment performance of a... A. General account B. Separate Account C. Personal Account D. Bank account

B. Separate account

Which of the following states the purpose of life insurance is to replace the economic value of an individual? A. The needs approach B. The human life value principal C. The income needs principal D. The business needs approach

B. The human life value principal

A general report in regard to the applicants finances, health, character, Work, hobbies, and other habits that is usually completed by interviewing friends and associates is knows as A. A consumer report B. An investigative consumer report C. An attending physicians statement D. A medical information bureau report

B. an investigative consumer report is also called an inspection report

All of the following statements regarding fraud and false statements are correct EXCEPT: A. A person who commits fraud is subject to a fine B. A person who commits fraud is subject imprisonment for up to 10 years C. A person who commits fraud is subject to both a fine and imprisonment up to 10 years D. A person who commits fraud is subject to imprisonment up to 25 years

C. A person who commits fraud is subject to both a fine and imprisonment up to 10 years

Carl accepts the initial premium when he sells an insurance policy and he sends this to the insurance company along with the application. Which authority represents what other believe his power is by actions taken? A. Express authority B. Implied Authority C., Apparent authority D. Agent Authority

C. Apparent Authority

When the owner of a life insurance policy is not the insured, there are three parties to the contract. Which of the following is not a party to this type of contract? A. Insured B. Applicant C. Beneficiary D. Insurer

C. Beneficiary - When a life insurance policy's applicant and insured are the same, it is a two-party contract between the insurer and the owner/insured. When the insured and policy-owner are different, it is a three party contract between the insurer, insured, and policy owner

In a buy-sell agreement, the life insurance policy is written on the A. Business B. Person who will buy the business in the event that the owner dies C. Business owner's life D. Family of the business owner

C. Business owner's life

The amount of money paid by an accidental death and dismemberment rider if the insured is disabled in an accident is referred to as A. Principal sum B. Principle sum C. Capital sum D. Capitol Sum

C. Capital sum

The failure to disclose known facts is A. Material misrepresentation B. Waiver C. Concealment D. Fraud

C. Concealment - generally an insurer can void a contract if it can prove the insured intentionally concealed a material fact

Christy has a term policy that will allow her to switch over to a whole life policy at any time during the first half of the term without providing evidence of insurability. What type of policy is this? A. Level term insurance B. Renewable term insurance C. Convertible term insurance D. Reentry term insurance

C. Convertible term insurance

Which rider lets insureds buy additional coverage without proof of insurability in order to keep pace with inflation A. Guaranteed insurability B. Accidental death and disability rider C. Cost of living D. Payor rider

C. Cost of living

In which type of term policy does the annual premiums remain level throughout the policy while the death benefits decreases? A. Increasing term B. Level term C. Decreasing Term D. Convertible Term

C. Decreasing Term

Which of the following types of advertising does not involve an agent and is conducted through the mail, by advertisements in newspaper and magazines, on televison and radio or through the internet? A. Direct Writing B. Captive Agency system C. Direct Response D. Cold Calling

C. Direct Response

An insurance company incorporated in Wisconsin and conducting business in Wisconsin is known as a domestic company. What kind of company are they considered if they do business in Minnesota? A. Alien B. Domestic C. Foreign D. Nonadmitted

C. Foreign

Which of the following premiums is the mortality element minus the interest elements? A. Loaded premium B. Gross Premiums C. Net Premium D. Fixed Premium

C. Gross premiums - the net premium plus the expense element. It may also be referred to as the loaded premium

Which of the following is NOT flexible in a universal life policy A. Premium accounts B. Premium Schedule C. Guaranteed interest rate D. Death benefits

C. Guaranteed interest rate - not flexible in a universal life policy

Which of the following imposes a requirement that the insurer must keep all medical information confidential and protect the applicant's privacy? A. Consumer Reports B. Medical information bureau C. HIPAA D. Consumer investigative reports

C. HIPAA - If any health information is going to be shared, applicants must be given notice of the insurer's information-sharing practices, their right to maintain privacy, and an opportunity to refuse to have their information released

Which of the following factors is NOT prohibited from use in order to classify a risk? A. Race B. Religion C. Marital Statues D. Place of residence

C. Marital status

Which of the following is a non-profit insurance trade association that maintains underwriting information on applicants from hundreds of insurers? A. HIPPA B. Consumer reports C. Medical information Bureau D. Investigative consumer reports

C. Medical information Bureau

Suzanne regularly leaves her side door unlocked when she leaves for work. One afternoon a thief entered her apartment and stole all of her jewelry. What was the the type of hazard in this example? A. Physical B. Moral C. Morale D. The neighborhood

C. Morale Hazard

Living and death benefits, level premiums, and lifetime coverage are characteristics of which of the following classes of insurance? A. Term life insurance B. Industrial life insurance C. Permanent life insurance D. Home service life insurance

C. Permanent life insurance

All of the following statements about term insurance are correct EXCEPT? A. Term coverage lasts only for the term of the policy B. Term insurance provides only a death benefit C. Premiums are higher then other types of life insurance policies D. No death benefit is payable if the insured dies after the term expires

C. Premiums are higher than other types of life insurance policies

A part of the application that requires the agent to provide information regarding the proposed insured, such as habits, character, and relationship with the insured is knows as A. Biding receipt B. Conditional Receipt C. Producer's report D. Confidentiality report

C. Producer's report

Wearing a seat belt in a car is an example of which method of managing risk? A. Retain B. Avoid C. Reduce D. Transfer

C. Reduce

Which of the following is NOT required to be able to sell variable policies? A. A state insurance producer incense B. Registration with FINRA C. Registration with the NAIC D. A passing score on the appropriate securities exam

C. Registration with the NAIC

Which of the following is an above average risk of loss and unfavorable to an insurance company? A. Standard B. Preferred C. Substandard D. Declined

C. Substandard

Which of the following types of insurance is designed to provide life insurance protection for only a limited time? A. Whole life insurance B. Variable life insurance C. Term Life insurance D. Universal life insurance

C. Term life insurance

Tammy has a $100,000 life insurance policy with a double indemnity rider. Tammy is killed in an automobile accident. How much will the policy pay? A. 100000 B. 180000 C. 200000 D. 400000

C. The policy will pay a death benefit of 200000. the extra benefit is usually the same amount as the policy, so it doubles the death benefit

Which of the following factors does NOT have an effect on the insurance premium rates? A. Mortality and morbidity B. Interest rates C. Producer certification D. Expenses

C. The producer certification - does not have any effect on premium rates. Mortality, morbidity, interest rates, and expenses do

All of the following statements about completing the insurance application are correct EXCEPT: A. any change to an application must be initialed by the applicant B. The application form must be signed by both the applicant, proposed insured (if not the applicant) and producer/agent C. The producer's report must be signed by both the applicants, proposed insured (if not the applicant) and producer/agent D. Collecting the first premium with the application is the quickest way to get coverage in force

C. The producer's report is only signed by the producer. The proposed insured does not see this report

Most states allow backdating to be done on an insurance application for A. Up to 2 months B. Up to 4 months C. Up to 6 months D. Up to 9 Months

C. Up to 6 months - Backdating is done so that the premium can be based on an earlier age for the insured. If the application is backdated the policy becomes effective as of the date and the insured must pay back premiums from that date

Which of the following terms describes a legal agreement between two competent parties that promises a certain performance in exchange for a certain consideration? A. An offer B. An acceptance C. A contract D. A consideration

C. a contract

Kumar has a life insurance policy with a rider that will pay him $1,000 per month if he is totally and permanently disabled. Which type of rider does he have? A. Waiver of premium rider B. Accidental death and disability rider C. Disability income rider D. Payor Rider

C. disability income rider - providing him money to help with bills during the period he is disabled

Karen has a universal life policy she purchased several years earlier. At that time, the death benefit in the policy was $100,000. Her cash value is now $20,000, and she has selected death benefit option B. How much is her current death benefit? A. 20000 B. 80000 C. 100000 D. 120000

D. 120000 - Option B provides for an increasing death benefit equal to policy's face amount plus the cash value.

While delivering the policy, the producer must obtain a signed document that the insured's health is the same as when he or she applied for the insurance policy. This document is called A. An inspection report B. A delivery Receipt C. A policy review D. A statement of good health

D. A statement of good health - this gives the insurer a good basis to contest a claim if it turns out that the insured's health declined before the coverage actually went into effect

The fair credit reporting act requires which of the following to be issued to all applications for life and health insurance? A. A notice to the applicant B. A financial disclosure statements C. A free credit check D. All of these must be issued to applicants

D. All of these must be issued to applicants

Which settlement option pays only the earnings on the death benefit to a beneficiary A. Life income B. Fixed amount C. Fixed period D. Interest only

D. Interest only

Which of the following riders allows for an advance of the death benefit if the insured is confined to a nursing home or cannot perform the activities of daily living?> A. Guaranteed isurability rider B. Accidental death or dismemberment rider C. Return of premium rider D. Long-term care rider

D. Longer term care rider - The payment advance reduces the death benefit payable upon death

All of the following statements regarding variable life insurance are true EXCEPT A. Variable life's cash values will go up and down based on performance of the separate account B. Variable universal life does not have a guaranteed minimum death benefit C. Agents who sell variable life must be licensed to sell insurance by the state and also registered as securities representatives D. Most variable life policies offer a guarantee of a minimum return

D. Most variable life policies offer a guarantee of a minimum return

Insurance companies often purchase insurance to cover their own exposure to loss. this is called A. Self insurance B. Loss control insurance C. Surplus lines insurance D. Reinsurance

D. Reinsurance

Which of the following represents pure risk A. A poker game B. Gambling in the stock market C. Investing in a new business D. The chance your house may burn down

D. The chance your house may burn down - pure risk involved the possibility of loss. Speculative risk involves the possibility of loss and gain

Which of the following is NOT a personal use of life insurance A. Estate Creation B. Cash accumulations C. Mortgage payoff D. Third party ownership

D. Third party ownership

Which one of the following is not 1 of the 4 elements of a legal contract? A. Offer B. Acceptance C. Legal purpose D. Unilateral

D. Unilateral - that just means there is only one promise made

Which of the following is waiver of all future premiums in the event of total and permanent disability? A. Guaranteed Insurability B. Return on premium C. Accidental death D. Waiver of Premium

D. Waiver of Premium

Zelda agrees to pay premiums on her policy every year for 20 yrs. After that, she will no longer have to pay premiums, but her insurance protection will cont. until she dies. Zelda has A. A whole life policy B. A limited pay policy C. A single premium policy D. A Modified premium policy

B. A limited pay policy - because Zelda is required to pay premiums for only a limited period

Which of the following terms describes something that is used to add benefits to a life insurance policy and customize the coverage to an insured's particular needs? A. A life insurance addition B. A rider C. A premium D. A contract

B. A rider

All of the following statements about a stock insurance company are true EXCEPT: A. A stock company sells stock to stockholders B. A stock company is a participating company C. A stock company is a nonparticipating company D. A stock company has shareholder

B. A stock company is a participating company

When does the face amount of a jumping juvenile policy typically increase? A. Age 15 B. Age 18 C. Age 35 D. Age 65

B. Age of 18

The assets left behind after an individual's death is known as A. Liquidity B. An estate C. Debt D. Financial obligation

B. An estate

A person in a position of financial trust is called A. a commingler B. A fiduciary C. An actuary D. An underwriter

B. Fiduciary - Agents have a fiduciary responsible to applicants/insureds and the insurance company

States require companies to have a license to sell insurance in the state. The license is called A. A certificate of authority B. A reinsurance license C. A producer's license D. An admittance license

A. A certificate of authority

Ashley has a policy that she must pay premiums on until she is 100 years old or until she dies. Ashley has A. A continuous premium whole life policy B. A limited Pay policy C. A single premium policy D. A modified premium policy

A. A continuous premium whole life policy - she is required to pay premiums for her whole life or until she is 100

Which of the following riders allow insureds who are terminally ill to obtain benefits from insurance policies prior to their death? A. Accelerated benefits riders B. Payout rider C. Disability income rider D. Waiver of premium rider

A. Accelerated benefits rider

The preretirement period, one of the distinct income needs periods, is also known as the A. Blackout period B. Family dependency period C. cash needs period D. Expense Period

A. Blackout period

What is a contract or device for transferring risk from a person, business, or organization to an insurance company? A. Insurance B. Law of Large Number C. Adhesion D. Agency

A. Insurance

During the underwriting process, medical exams and testing are paid for by the A. Insurer B. Agent/producer C. Underwriter D. Applicant

A. Insurer

Which of the following specialized policies insures two people and pays its benefit when the first one dies? A. Joint life policy B. Survivorship policy C. Juvenile policy D. Family Policy

A. Joint Life policy

Which of the following terms refers to how easily an asset can be turned into cash without loss of value? A. Liquidity B. Estate conversation C. Estate creation D. Hard Assets

A. Liquidity

What do insurance companies use to help predict how many losses will occur in a group or class of individuals? A. The law of large numbers B. Standard and Poor's insurance rating service C. Risk retention groups D. Adverse selection

A. The law of large numbers

The process of evaluating risk to determine if the risk is one that the insurance company wishes to insure is also known as the A. Underwriting process B. Application process C. Decision making process D. Insurance process

A. Underwriting process

Which of the following types of insurance requires a level premium and provides lifelong protection? A. Whole life insurance B. Variable life insurance C. Term life insurance D. Universal life insurance

A. Whole life insurance

If a fire causes dame to a building, the fire is a A. Hazard B. Peril C. Risk D. Exposure

B. Peril

A risk that represents a chance of experiencing a loss that is below average and therefore favorable to the company is a A. Standard Risk B. Preferred Risk C. Substandard Risk D. Declined Risk

B. Preferred risk - these risks may be insured at preferred or discounted rates

Martha has a universal life policy she purchased several years earlier. At that time, the death benefit in the policy was $100,000. Her cash value is now $50,000, and she has selected death benefit option A. How much is her current death benefit? A. 50000 B. 80000 C. 100000 D. 150000

C. 100000 - option A in a universal life policy provides a level death benefit equal to the policy's face amount. If she would have chosen Option B, the amount of the death benefit would have been $150000

For an accidental death benefit rider to be payable the insured must die (due to injury from an accident) within how many days of the accident? A. 30 B. 60 C. 90 D. 180

C. 90

Which of the following individuals represent only one insurance company? A. An independent agent B. A general Agent C. A captive Agent D. A managing General agent

C. A captive agent

All of the following statements about the waiver of premium rider are true EXCEPT: A. With the waiver of premium rider, at first, insureds are considered disabled if they are unable to work at their present job B. With the waiver of premium rider, if an insured recovers and returns to work after a disability they must begin paying policy premiums again. C. with the waiver of premium rider, premiums are reduces by 80% during any period that the insured is disabled D. with the waiver of premium rider, if the insured becomes permanently disabled before the insured's working years end, premiums will continue to be waived for life

C. With the waiver of premium rider, premiums are reduced by 80% during any period that the insured is disabled

Life insurance premiums are lowest under which premium payment mode? A. Monthly B. Quarterly C. Semi-annual D. Annual

D. Annual

All of the following are examples of buy-sell agreements EXCEPT A. Cross-purchase B. Entity plan C. Stock redemption plan D. Executive bonus plan

D. Executive bonus plan - rather than giving a yearly bonus to an employee in cash, companies can use the money to buy a life insurance policy for the employee. The other 3 answers are buy-sell agreements and provide for the sale of a business at the death of an owner. they are often referred to as a business continuation plan

The Death benefit of a whole life policy is A. Variable B. Decreasing C. Increasing D. Fixed and Level

D. Fixed and Level

All of the following are names of distinct income need periods EXCEPT A. Family dependency B. Preretirement C. Retirement D. Social Security

D. Social Security - Actually pays the survivor benefits during the family dependency and retirement periods, but not during the preretirement period. for this reason, the preretirement period is often called the blackout period.

Which of the following individuals is NOT required to sign the application form? A. The insured B. The producer/Agent C. The applicant D. The beneficiary

D. The beneficiary

Under Which of the following receipts is coverage effective as of the date of the application as long as the applicant is found the be insurable under the company's standard underwriting rules? A. Conditional Receipt B. Binding Receipt C. Standard Receipt D. Acceptance Receipt

A. Conditional Receipt - Some conditional receipts make the coverage effective on the date of application, or the date of the medical examination, whichever is later. A binding receipt is often used with homeowners insurance, NOT life insurance.

Which of the following classes of life insurance has a death benefit only, increasing premiums temporary coverage and expires at end of the term A. Variable life insurance B. Term life insurance C. Permanent life insurance D. Home service life insurance

B. Term life insurance - temporary

The ABC insurance company is incorporated in Mexico. While doing business in Texas, it is A. Domestic insurer B. A foreign insurer C. An alien insurer D. An export insurer

C. an alien insurer

Paul has a life insurance policy on his son for which he pays all the premiums. A rider to this policy states that if Paul becomes permanently and totally disabled, the premiums will be paid until his son reaches age 21, at which point his son will take over the premium payments. Which type of rider does he have? A. Waiver of premium rider B. Accidental death and disability rider C. Disability income rider D. Payor rider

D. Payor rider - because it provides for a waiver of premiums on the son's coverage if the payor (paul) becomes disabled

A guarantee that something is true is a A. Representation B. Misrepresentation C. Material Misrepresentation D. Warranty

D. Warranty

Which of the following is used to determine a consumer's eligibility for personal credit, insurance, or employment A. Consumer reports B. Medical information bureau C. HIPPA D. Consumer investigative reports

A. Consumer reports - A credit report is an example of a consumer report. this can tell underwriters if an applicant is likely to be reliable about making premium payments