Life Exam

An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy?

$50,000

Which is the primary source of information used for insurance underwriting?

Application

The Commissioner must examine each domestic and foreign company in order to determine its financial condition, ability to fulfill its obligations, compliance with insurance laws, and dealings with its policyholders

At least once in every 5 years and whenever deemed necessary the Commissioner.

Which of the following is TRUE about credit life insurance?

Creditor is the policyowner.

The authority granted to an agent through the agent's contract is referred to as

Express authority.

What type of insurance would be used for a Return of Premium rider?

Increasing Term

Which of the following best describes annually renewable term insurance?

It is level term insurance.

Which of the following best describes gross annual premium?

Net premium plus expenses

Traditional IRA contributions are tax deductible based on which of the following?

Owner's income

Which type of retirement account does not require the owner to start taking distributions at age 72?

Roth IRA

Which of the following insurers are owned by stockholders?

Stock

All of the following would be different between qualified and nonqualified retirement plans EXCEPT

Taxation on accumulation

Which of the following is true regarding a market value adjusted annuity?

The owner is guaranteed a fixed interest rate for a specific period of time.

Which of the following is NOT a goal of risk retention?

To minimize the insured's level of liability in the event of loss

What is the purpose of the Insurance Guaranty Association?

To protect policyowners against insurer insolvency

The Waiver of Cost of Insurance rider is found in what type of insurance?

Universal Life

If a producer has administrative action taken against his license, he must report such action

Within 30 days of the final disposition on such action.

How long are the free-look periods provided during policy replacement?

20 days

All of the following could own group life insurance EXCEPT

A group needing low-cost life insurance.

Which of the following is NOT an allowable 1035 exchange?

A whole life insurance policy is exchanged for a term insurance policy.

Which of the following produces evaluations of insurers' financial status often used by state departments of insurance?

AM Best

Who can make a fully deductible contribution to a traditional IRA?

An individual not covered by an employer-sponsored plan who has earned income

If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered

An unfair trade practice.

Which of the following types of insurance policies is most commonly used in credit life insurance?

Decreasing term

If a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT

Erase the incorrect answer and record the correct answer.

If a deferred annuity is surrendered prematurely, a surrender charge is imposed. How is the surrender charge determined?

It is a percentage of the cash value and decreases over time.

Which of the following is true about the premium on the children's rider in a life insurance policy?

It remains the same no matter how many children are added to the policy.

The continuing education requirement for licensees, during the initial licensing period, is a

Minimum of 60 hours of instruction.

Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early?

Paid-up option

Which of the following would provide an underwriter with information concerning an applicant's health history?

The Medical Information Bureau

A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true?

The amount of the distribution is reduced by the amount of a 20% withholding tax.

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?

The death benefit can be increased by providing evidence of insurability.

A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums?

The insured's premiums will be waived until she is 21.

What is the advantage of reinstating a policy instead of applying for a new one?

The original age is used for premium determination.

In a life settlement contract, whom does the life settlement broker represent?

The owner

All of the following are true regarding a decreasing term policy EXCEPT

The payable premium amount steadily declines throughout the duration of the contract.

Which of the following best describes what the annuity period is?

The period of time during which accumulated money is converted into income payments

An individual applies for a life policy. Two years ago he suffered a head injury from an accident, so he cannot remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history one year later. What will probably happen?

The policy will not be affected.

An insured stops making payments on a loan taken from his cash value policy. What will most likely happen?

The policy will terminate when the loan amount with interest equals or exceeds the cash value.

All of the following are true regarding the guaranteed insurability rider EXCEPT

This rider is available to all insureds with no additional premium.

The Commissioner may require the temporary licensee to have a suitable sponsor who is a licensed producer or insurer and

Who assumes responsibility for all acts of the temporary licensee.

Any individual insurance producer who allows his license to lapse may, within 12 months from the due date of the renewal fee, reinstate the same license

Without the necessity of passing a written examination, but a penalty fee of double the unpaid renewal fee must be paid.

Are insurance company underwriters allowed to discriminate?

Yes, but not unfairly

Which of the following features of the Indexed Whole Life policy is NOT fixed?

Cash value growth

Another name for a substandard risk classification is

Rated.

An applicant buys a nonqualified annuity, but dies before the starting date. For which of the following beneficiaries would the interest accumulated in the annuity NOT be taxable?

Spouse

If the annuitant dies during the accumulation period, who will receive the annuity benefits?

The beneficiary

Which of the following statements concerning buy-sell agreements is true?

Buy-sell agreements are normally funded with a life insurance policy.

A long stretch of national economic hardship causes a 7% rate of inflation. A policyowner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change?

Cost of Living Rider

In a direct rollover, how is the money transferred from one plan to the new one?

From trustee to trustee

Before a variable contract may be issued, for how long must a copy of this form be on file with the Commissioner?

30 days

To avoid interest on insurance proceeds, the insurer must pay the death benefit within how many days of receipt of proof of loss?

30 days

An IRA uses immediate annuities to pay out benefits; the IRA owner is nearly 75 years old when he decides to collect distributions. What kind of penalty would the IRA owner pay?

50% tax on the amount not distributed as required

What is the waiting period on a Waiver of Premium rider in life insurance policies?

6 months

An insurer was just caught misrepresenting the terms of a policy. What fine does he face?

A fine of up to $1,000 or imprisonment for up to 6 months

Under which of the following annuity options does the annuitant select the time period for the benefits, and the insurer determines how much each payment will be?

Installments for a fixed period

Which of the following is an example of a producer's fiduciary duty?

The trust that a client places in the producer in regard to handling premiums.

The premium of a survivorship life policy compared with that of a joint life policy would be

Lower.

Which of the following best describes the unfair trade practice of defamation?

Making derogatory oral statements about another insurer's financial condition

The Commissioner may issue a temporary insurance producer license without requiring an examination for a period

Not to exceed 180 days.

Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?

Payor Benefit

All of the following are characteristics of group life insurance EXCEPT

Premiums are determined by the age, sex and occupation of each individual certificate holder.

Willie, a private investigator, was hired by an insurer to obtain a character report on Joan, an applicant. Willie pretends to be a reporter working on a story about working women in Joan's town. During the conversation, Joan is asked a variety of questions for which the answers will be used to determine the final underwriting decision. This is an example of

Pretext interviewing.

A couple owns a life insurance policy with a Children's Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability?

Proof of insurability is not required.

Which nonforfeiture option provides coverage for the longest period of time?

Reduced paid-up

All of the following are TRUE statements regarding the accumulation at interest option EXCEPT

The interest is not taxable since it remains inside the insurance policy.