Life Chapter 2 - Marketplace
The following acts are unlawful and are misdemeanors in California except when performed by a surplus line broker, EXCEPT: A - Acting as a representative of an insurance company in soliciting and servicing policyholders in this state. B - In any other manner aiding a nonadmitted insurer to transact insurance business in this state. C - Acting as agent for a nonadmitted insurer in the transaction of insurance business in this state. D - In any manner advertising a nonadmitted insurer in this state.
A - Acting as a representative of an insurance company in soliciting and servicing policyholders in this state. Rationale - This is the definition of an agent.
Which of the following is not a difference in authority between an agent and a solicitor? A - An agent can give insurance quotes, while a solicitor can only process claims. B - An agent or broker cannot act like a solicitor, and a solicitor cannot act like a broker or agent. C - An agent represents the company, whereas a solicitor is an assistant to an agent and has no binding authority. Incorrect AnswerA solicitor cannot be employed by more than one fire and casualty broker-agent at the same time.
A - An agent can give insurance quotes, while a solicitor can only process claims Rationale - A solicitor can process claims in the same capacity as an agent as they are the Agents representative.
What is the definition of a life agent? A - Any person authorized by and on behalf of a life, disability, or life and disability insurer to transact life, disability, or life and disability insurance. B - A person who collects charges or premiums from residents of California in connection with life or health insurance coverage or annuities. C - A person who transacts insurance, other than life insurance, on behalf of clients with insurance companies. D - A person who is authorized to transact commercial insurance products, 24-hour Care coverage, disability insurance, as well as long-term care insurance.
A - Any person authorized by and on behalf of a life, disability, or life and disability insurer to transact life, disability, or life and disability insurance. Rationale - A life agent is any person authorized by and on behalf of a life, disability, or life and disability insurer to transact life, disability, or life and disability insurance.
It is against the law for an insurance licensee to offer ________ to anyone as an incentive to acquire some other type of business. A - free insurance B - reduced benefits C - life insurance D - price reduced insurance
A - free insurance Rationale - It is against the law for an insurance licensee to offer free insurance to anyone as an incentive to acquire some other type of business.
All the following are true regarding denial of a license without a hearing except: A - the applicant has been convicted of a misdemeanor B - the applicant has had license revoked in past 5 years C - the applicant has been convicted of a felony D - the applicant has been denied a license in past 5 years
A - the applicant has been convicted of a misdemeanor Rationale - misdemeanor has to be insurance related.
A company has how many days to send an appointment for a new licensed agent to department of insurance? A - 7 days B - 14 days C - 21 days D - 30 days
B - 14 days Rationale - To make the relationship legal the company must submit a notice of appointment to the Commissioner within 14 days.
Every life and accident and health agent is required to keep all records for a minimum of ________ years. A - 2 B - 5 C - 10 D - 7
B - 5 Rationale - All records must be kept a minimum of 5 years.
Transacting without a license would result in which of the following penalties? A - All of these are penalties that apply to transacting without a license B - A fine not exceeding $50,000 Incorrect AnswerA misdemeanor Incorrect AnswerIf within 5 years a denial of a license without a hearing
B - A fine not exceeding $50,000 Rationale - This is punishable by a fine not exceeding $50,000 or by imprisonment in a county jail for a period not exceeding one year, or by both fine and imprisonment. (CIC 1633)
Agents represent insurers in which of the following: A - As licensed producers B - All of these C - Soliciting applications for insurance D - As field underwriters
B - All of these Rationale - Agents are licensed as "Producers", when taking an application they are considered "field underwriters", and agents solicit insurance for the insurer.
Which of the following is correct concerning illustrations? A - Basic illustrations contain only guaranteed elements. B - All preprinted illustrations shall contain a specialized notice in 12 point bold print, with space on all four sides that is made part of the document itself or as an attached cover sheet. C - Current and discipline scale refers to the nonguaranteed elements in the illustration. D - Supplemental illustrations depict only nonguaranteed elements.
B - All preprinted illustrations shall contain a specialized notice in 12 point bold print, with space on all four sides that is made part of the document itself or as an attached cover sheet. Rationale - Basic illustrations contain both guaranteed and nonguaranteed elements, supplemental illustrations contain nonguaranteed elements, and current and discipline apply to the nonguaranteed elements of a contract. Only the disclosure notice statement was correct.
Which of the following is not considered a loss under errors and omissions? A - An agent explains health or disability insurance to a client and does not revealing the fact that the policy has a deductible, coinsurance, and co-payments, as well as an exclusion for a preexisting medical condition. B - An agent steals funds from customers. C - The agents accepts a check from a client and fails to send it to the insurer in a timely manner. D - An agent accidentally records an incorrect answer on an application.
B - An agent steals funds from customers. Rationale - E & O does not cover protection for liabilities that result from an agent or broker committing any criminal act.
An A&H agent may transact all of the following except: A - Accidental death B - Coverage on human lives C - 24 hour care coverage D - Disability income
B - Coverage on human lives Rationale - Coverage on human lives is a phrase that means life insurance. Life agent licenses allows the licensee to transact coverage on human lives (life insurance), endowments, annuities, death or dismemberment by accident products as well as benefits for disability income.
If an insurer issues a policy, within how many days must it file a notice of appointment with the Commissioner? A - If the insurer issues a policy, the insurer must forward to the Commissioner a notice of appointment of the agent as the insurer`s agent not more than 28 days after the agent submitted the insurance application. B - If the insurer issues a policy, the insurer must forward to the Commissioner a notice of appointment of the agent as the insurer`s agent not more than 14 days after the agent submitted the insurance application. C - If the insurer issues a policy, the insurer must forward to the Commissioner a notice of appointment of the agent as the insurer`s agent not more than 40 days after the agent submitted the insurance application. D - If the insurer issues a policy, the insurer must forward to the Commissioner a notice of appointment of the agent as the insurer`s agent not more than 7 days after the agent submitted the insurance application.
B - If the insurer issues a policy, the insurer must forward to the Commissioner a notice of appointment of the agent as the insurer`s agent not more than 14 days after the agent submitted the insurance application. Rationale - If the insurer issues a policy, the insurer must forward to the Commissioner a notice of appointment of the agent as the insurer`s agent not more than 14 days after the agent submitted the insurance application.
All of the following are incorrect, except: A - The authority of a broker is defined in a contract of agency. B - Insurance brokers represent the client in purchasing an insurance product C - Brokers must post a broker bond with every insurer they place business with. D - Agents are exempt from liability for actions taken unauthorized by the insurer.
B - Insurance brokers represent the client in purchasing an insurance product Rationale - Brokers represent the buyer in property and casualty insurance in the purchase of insurance.
What is the penalty for transacting insurance without a valid insurance license? A - Fine of $75,000 for 1st offense, $100,000 for second offense. B - Jail time up to 1 year and $50,000 fine. C - Fine of $100,000. D - Prison sentence up to 5 years and $25,000 fine.
B - Jail time up to 1 year and $50,000 fine. Rationale - Any person who transacts insurance without a valid license is guilty of a misdemeanor, punishable by a fine not exceeding fifty thousand dollars ($50,000) or by imprisonment in a county jail for a period not exceeding one year, or by both fine and imprisonment.
All of the following are true concerning a life analyst except: A - Must reside in California. B - Must be employed by a life company. C - Must pass an exam to become an analyst. D - Must be at least 18 years old.
B - Must be employed by a life company. Rationale - May not be an employee of an insurance company.
Which of the following is not an action of transacting insurance? A - Any transactions that later result from the operation of the contract. B - Receiving compensation for transacting insurance. C - Negotiations preliminary to the execution of a contract. D - The actual execution of a contract.
B - Receiving compensation for transacting insurance. Rationale - Receiving money for transacting insurance is not part of the definition of transacting insurance; the other 3 are. Of course, you must be licensed in order to legally transact insurance.
During the transaction of insurance, the following must be included EXCEPT: A - Date insurance is effective and any date it ceases to be effective. B - The applicant`s sexual preference. C - Policy number. D - Name of the insured.
B - The applicant`s sexual preference. Rationale - An applicant`s sexual preference should not be listed.
Any time there is a change in a licensees residence address, principal business address, mailing address, and/or email address the licensee must notify the Commissioner electronically: A - within the 30 day grace period. B - immediately. C - within the 90 day grace period. D - when the house completes escrow.
B - immediately. Rationale - Any time there is a change in a licensees residence address, principal business address, mailing address, and/or email address the licensee must notify the Commissioner electronically, immediately. Previously the Commissioner was notified in writing, but that has now changed to electronically.
Upon termination of all appointments or cancellation of the bond required if acting as a broker your permanent license: A - Does not permit the holder transact any insurance B - May be renewed or reactivated C - All of these D - Shall not be cancelled but become inactive
C - All of these Rationale - All of the statements are true.
Which of the following is NOT true regarding an agent and broker? A - An insurance agent is a representative of an insurance company in soliciting and servicing policyholders. B - The broker represents the insured, NOT the insurer. C - Brokers can legally bind insurance anytime necessary to do so. D - A broker is any person who transacts insurance, other than life, disability, and health insurance, on behalf of clients with insurance companies.
C - Brokers can legally bind insurance anytime necessary to do so. Rationale - Brokers cannot legally bind insurance and the coverage for that insurance will not be in effect until the company accepts the business.
Which of the following is not a source of information an underwriter may use to find information about an applicant? A - MIB - The Medical Information Bureau B - Physician/medical facility records C - Department of Credit Reporting D - Department of Motor Vehicles
C - Department of Credit Reporting Rationale - Credit reports are not used.
Insurers that deal directly with insureds without the use of agents through various forms of print, visual and aural media are considered to be: A - Captive B - Direct writers C - Direct response D - Employees of the insurer
C - Direct response Rationale - Direct response/direct mail is a system that does not use an agent. Another term that can be used on the test would be mass marketing.
Which of the following is NOT an exception to the free insurance prohibition? A - Insurance provided in connection with newspaper subscriptions. B - The services of a motor club in regard to towing, emergency roadside service, bail bond service, etc. which are not defined as the transaction of insurance. C - Insurance provided in connection with medical companies. D - Insurance to guarantee the performance of a product and reimburse a customer for losses resulting from such product's failure
C - Insurance provided in connection with medical companies.
Agency law does not encompass which of the following? A - A contract completed by the agent on behalf of the principal is a contract of the principal. B - Agency law is when one person (agent) acts on behalf of another (principal) which makes their actions the acts of the principal. C - Knowledge of the principal is knowledge of the agent. D - Notification of a claim is the same as notification of the principal.
C - Knowledge of the principal is knowledge of the agent. Rationale - Its knowledge of the agent that is knowledge of the principal.
Which of the following describes someone who offers to advise any person insured under a life or disability insurance contract? A - Insurance solicitor B - Administrator C - Life and disability analyst D - Life agent
C - Life and disability analyst Rationale - A life and disability insurance analyst is a person who offers to advise any person insured under a life or disability insurance contract.
What type of policy will protect an agent against liability for failure to use due care and skill? A - Malpractice B - Personal liability C - Professional liability D - Agency policy
C - Professional liability Rationale - Professional liability for nonmedical professionals is known as Errors and Omissions which is the type of professional liability an agent would purchase.
A producer may ask about all of the following to determine if an applicant qualifies for insurance EXCEPT: A - Employment duties B - Use of medication C - Religious beliefs D - Involvement in hazardous activities
C - Religious beliefs Rationale - Questions may include dosages and frequency of medication, involvement in hazardous activities, and specifics regarding employment duties, but not religious beliefs.
The following are valid reasons for the Commissioner to deny the use of a name EXCEPT: A - The name gives the impression the licensee is authorized to conduct a type of business it cannot legally conduct. B - The name would interfere or is too similar to the name of C - The name is not being used by anyone and does not deceive the public. D - The name would lead the public in the wrong direction.
C - The name is not being used by anyone and does not deceive the public. Rationale - This would be a valid reason to use the name.
Life Settlement Brokers represent: A - The buyer in the purchasing of an insurance policy. B - The buyer in the life settlement process. C - The seller in the life settlement by finding a buyer for the existing policy. D - None of these.
C - The seller in the life settlement by finding a buyer for the existing policy. Rationale - A life settlement brokers helps an existing insured find a buyer for their life insurance policy.
All the following are entitled to a hearing concerning a license denial except: A - the applicant submitted a fraudulent educational certificate B - the applicant lacks integrity C - convicted of a misdemeanor involving insurance D - the applicant lied on application
C - convicted of a misdemeanor involving insurance Rationale - if insurance related no hearing.
When a person gets their life license, without a company appointment their license is considered A - suspended B - in grace period C - inactive D - active
C - inactive Rationale - must be appointed with a company.
Which of the following is the best statement about selling without an appointment? A - A licensed agent may offer a proposal for insurance to a client on behalf of an insurer for which the agent is not specifically appointed for a 30 day grace period. B - A licensed agent may offer a proposal for insurance to a client on behalf of an insurer for which the agent is not specifically appointed for a 60 day grace period. C - A licensed agent may offer a proposal for insurance to a client on behalf of an insurer for which the agent is not specifically appointed for a 90 day grace period. D - A licensed agent may offer a proposal for insurance to a client on behalf of an insurer for which the agent is not specifically appointed.
D - A licensed agent may offer a proposal for insurance to a client on behalf of an insurer for which the agent is not specifically appointed. Rationale - A licensed agent may offer a proposal for insurance to a client on behalf of an insurer for which the agent is not specifically appointed.
Which of the following would be incorrect regarding illustrations? A - Illustrations must be not only numbered but numbered in relationship to the total number of pages. B - Illustrations used when making presentations to seniors must bold the guaranteed values and the nonguaranteed values must be in standard print. D - All of these are true. C - If an illustration is used the applicant and agent must sign the illustration and a copy left with the applicant and another copy submitted along with the application to the underwriter.
D - All of these are true. Rationale - All of these statements are true in regards to illustrations.
An agent's appointment with an insurer will be discontinued if all of the following circumstances exist, except: A - The agent's insurance license expires B - The insurer files a notice to terminate the appointment. C - The agent quits working for the insurer D - Another insurer submits another appointment.
D - Another insurer submits another appointment. Rationale - An agent can have an unlimited number of appointments
Which of the following is NOT covered under errors and omissions? A - Sale of employee benefit plans B - Advice and administrative activities C - Sale of insurance D - Fraud committed by the agent
D - Fraud committed by the agent Rationale - E & O coverage includes the sale of insurance and employee benefit plans, along with the advice and administrative activities associated with the agent`s or agency`s plan.
An employee assisting a life agent in acquiring and servicing life insurance applications and policies would need to be licensed as a: A - Life solicitor C - No license would be required as they are acting under the authority of the life agent who employs them D - Life agent license
D - Life agent license Rationale - Any person transacting life insurance must be licensed as a life agent. There is no life solicitor license.
A life agent may transact all of the following except: A - Death and dismemberment by accident B - Annuities C - Disability income D - Twenty-four care coverage
D - Twenty-four care coverage Rationale - Accident and health agents may transact 24 hour care coverage after completing a CE course and passing a proctored test.
Which of the following is the best statement about brokers selling insurance? A - It could be unethical for a broker to accept both a fee from the client and a commission from the insurer. B - It is unlawful for a broker to accept both a fee from the client and a commission from the insurer. C - It is illegal for a broker to accept both a fee from the client and a commission from the insurer. D - It is not unethical for a broker to accept both a fee from the client and a commission from the insurer.
Rationale - It could be unethical for a broker to accept both a fee from the client and a commission from the insurer.