Life Exam
Which of the following will NOT qualify for a limited lines producer license? A person selling endowments. A person selling travel accident insurance A person selling insurance on real estate transactions A person selling insurance from a lending institution in connection with a debt
A limited insurance producer is authorized to solicit only specialty insurance products. Among limited lines are flight, baggage, title, credit and funeral director. Endowments require a life producer's license.
All of the following would be considered an insurance transaction EXCEPT Negotiating coverage. Obtaining an insurance license. Soliciting a policy. Advising a policyholder regarding a claim.
An insurance transaction means the carrying on of business in insurance, which could include the solicitation of a policy, advising, negotiation, or inducement related to coverage or claims. Obtaining an insurance license is a prerequisite to transacting insurance.
Group life insurance is a single policy written to provide coverage to members of a group. Which of the following statements concerning group life is CORRECT? Coverage cannot be converted when an individual leaves the group. Premiums are determined by age, occupation, and individual underwriting. 100% participation of members is required in noncontributory plans. Each member covered receives a policy.
If the employer pays all of the premium, then all employees must be included.
Which of the following is NOT true regarding penalties for violation of the rules and regulations of the Insurance Code? License may not be revoked Fine up to $50,000 License may be suspended for several years Commissioner may issue a cease-and-desist order
In addition to issuing the cease-and-desist order, the Commissioner may suspend or revoke a producer's license, as well as issue monetary fines up to $50,000 for violation of the Insurance Code.
In forming an insurance contract, when does acceptance usually occur? When an insured submits an application When an insurer's underwriter approves coverage When an insurer delivers the policy When an insurer receives an application
In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy.
Within how many days after the initial pretrial hearing date must an insurance producer report criminal prosecution of the producer to the Commissioner? 7 days 15 days 30 days 60 days
In response to any administrative action or criminal prosecution, producers must report to the Commissioner of Insurance of said action no later than 30 days from the initial pretrial hearing date.
Which of the following terms means a result of calculation based on the average number of months the insured is projected to live due to medical history and mortality factors? Morbidity Life expectancy Mortality rate Risk exposure
Life Expectancy is an important concept in life settlement contracts. It refers to a calculation based on the average number of months the insured is projected to live due to medical history and mortality factors (an arithmetic mean).
A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as Survivorship insurance Juvenile protection provision Survivor protection Life planning
Life insurance can provide the funds necessary for the survivors of the insured to be able to maintain their lifestyle in the event of the insured's death. This is known as survivor protection.
Within what timeframe should an applicant or a producer request a hearing before the Commissioner regarding the notice of denial or nonrenewal of a license? Within 63 days after the application for license is mailed Within 30 days after the license is denied Within 30 days after the application for renewal is received by the Commissioner Within 63 days after the notice of denial is mailed
Once the Commissioner notifies an applicant or a producer of a license denial or nonrenewal, the applicant or producer has the right to make a written demand for a hearing (within 63 days after the denial/nonrenewal notice is mailed). The hearing mush be held within 30 days of the written demand.
For a retirement plan to be qualified, it must be designed for the benefit of IRS. Employees. Key employee. Employer.
Qualified plans are designed for the exclusive benefit of the employees and their beneficiaries.
A Return of Premium term life policy is written as what type of term coverage? Decreasing Renewable Level Increasing
Return of premium (ROP) life insurance is an increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid.
Which of the following is TRUE regarding the accumulation period of an annuity? It is limited to 10 years. It is a period during which the payments into the annuity grow tax deferred. It is also referred to as the annuity period. It is a period of time during which the beneficiary receives income
The "accumulation period" is the period of time over which the annuitant makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred.
Life income joint and survivor settlement option guarantees Payment of interest on death proceeds. Payout of the entire death benefit. Equal payments to all recipients. Income for 2 or more recipients until they die.
The Life Income Joint and Survivor option guarantees an income for two or more recipients for the duration of their lives. Most contracts stipulate that the surviving partner will receive a reduced payment after the other dies, although some will continue to pay the same amount. There is no guarantee that all the life insurance proceeds will be paid out.
All of the following may result in suspension or denial of an insurance license EXCEPT Delinquency in child support payments. Failure to pay state income taxes. Using the license for the purpose of writing controlled business. Sharing commissions with another licensed producer.
The license may be denied, suspended or not renewed for an intentional violation of an order for child support, or a failure to pay with an order directing payment of state income tax, or using the license primarily to write controlled business. Sharing commissions with an unlicensed individual could be grounds for license suspension.
All of the following may result in suspension or denial of an insurance license EXCEPT Using the license for the purpose of writing controlled business. Sharing commissions with another licensed producer. Delinquency in child support payments. Failure to pay state income taxes.
The license may be denied, suspended or not renewed for an intentional violation of an order for child support, or a failure to pay with an order directing payment of state income tax, or using the license primarily to write controlled business. Sharing commissions with an unlicensed individual could be grounds for license suspension.
What is the maximum civil penalty for willfully and knowingly violating a cease and desist order? $50,000 per violation $5,000 per violation and 1 year in jail $10,000 per violation if more than one $25,000 per violation
The maximum civil penalty for willful violations of a cease and desist order is $50,000 for each act or violation.
Upon policy delivery, the producer may be required to obtain any of the following EXCEPT Signed waiver of premium. Statement of good health. Payment of premium. Delivery receipt.
The policy does not go into effect until the premium has been collected. If the premium was not collected at the time of the application, the producer may also be required to get a Statement of Good Health from the applicant at the time of policy delivery. Waiver of premium is a rider that can be added to a life insurance policy, and not something to be obtained from the applicant.
Which of the following is a feature of a variable annuity? Interest rate is guaranteed. Securities license is not required. Benefit payment amounts are not guaranteed. Payments into the annuity are kept in the company's general account.
Under a variable annuity, the issuing insurance company does not guarantee a minimum interest rate or the benefit payment amounts. The annuitant's payments into the annuity are invested in the insurer's separate account. Agents selling variable annuities are required to have a securities license in addition to their life agent's license.
Which of the following best describes fixed-period settlement option? Both the principal and interest will be liquidated over a selected period of time. Only the principal amount will be paid out within a specified period of time. The death benefit must be paid out in a lump sum within a certain time period. Income is guaranteed for the life of the beneficiary.
Under the fixed-period option (also called period certain), a specified period of years is selected, and equal installments are paid to the recipient. Both the principal and interest are liquidated together over the selected period of time.
Both Universal Life and Variable Universal Life have a Flexible premium. Level fixed premium. Decreasing premium. Increasing premium.
Variable universal life, like universal life itself, has a flexible premium that can be increased or decreased as the policyowner chooses, so long as there is enough value in the policy to fund the death benefit.
The type of policy that can be changed from one that does not accumulate cash value to the one that does is a Whole Life Policy. Convertible Term Policy. Renewable Term Policy. Decreasing Term Policy.
A convertible term policy has a provision that allows the policyowner to convert to permanent insurance.
All of the following are dividend options EXCEPT Reduction of premium. Paid-up additions. Fixed-period installments. Accumulated at interest
Fixed-period installments is a settlement option, and not one of the dividend options.
What percentage of a company's employees must take part in a noncontributory group life plan? 0% 25% 75% 100%
If the employer pays all of the premium, all employees must be covered to avoid adverse selection.
All of the following would be different between qualified and nonqualified retirement plans EXCEPT IRS approval requirements Taxation on accumulation Taxation of withdrawals Taxation of contributions
Taxation on accumulation is deferred in both types of plans. The rest of the characteristics would differ.
Which of the following determines the length of time that benefits will be received under the Fixed-Amount settlement option? Size of each installment Predetermined length of time stated in the contract Length of income period Amount of interest
The size of each installment determines the length of time that benefits are received under the Fixed Amount settlement option. It logically follows that larger installments translate into shorter benefit periods.
Any licensed person whose activities affect interstate commerce and who knowingly makes false material statements related to the business of insurance may be imprisoned for up to 3 years. 5 years. 10 years. 12 years.
Anyone engaged in the business of insurance whose activities affect interstate commerce, and who knowingly makes false material statements may be fined, imprisoned for up to 10 years or both. If the activity jeopardized the security of the accompanied insurer, the punishment can be up to 15 years.
In forming an insurance contract, when does acceptance usually occur? When an insurer's underwriter approves coverage When an insurer delivers the policy When an insurer receives an application When an insured submits an application
In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy.
During a sales presentation a producer intentionally makes a statement which may mislead the insurance applicant. This describes Defamation. Twisting. Coercion. Misrepresentation.
Making false or misleading statements with the intent to defraud another is misrepresentation
All of the following are Nonforfeiture options EXCEPT Cash surrender Extended term Reduced paid-up Interest only
Nonforfeiture values include cash surrender, extended term and reduced paid-up. Interest only is a settlement option.
Which nonforfeiture option provides coverage for the longest period of time? Extended term Paid-up option Accumulated at interest Reduced paid-up
The reduced paid-up nonforfeiture option would provide protection until the insured reaches 100, but the face amount is reduced to what the cash would buy.
Variable Whole Life insurance is based on what type of premium? Flexible Graded Level fixed Increasing
Variable Whole Life insurance is a level fixed premium investment-based product.
Which of the following will NOT qualify for a limited lines producer license? A person selling insurance on real estate transactions A person selling insurance from a lending institution in connection with a debt A person selling endowments. A person selling travel accident insurance
A limited insurance producer is authorized to solicit only specialty insurance products. Among limited lines are flight, baggage, title, credit and funeral director. Endowments require a life producer's license.
In which of the following instances would the premium be tax deductible? Premiums paid by a mother on her son's policy Premiums paid by an employer on the life of a key person Premiums paid by an employer on a $30,000 group term life insurance plan for employees Premiums paid by an individual on his/her own life insurance
As a general rule, premiums paid for life insurance are not tax deductible. The exception to this rule is when an employer buys group term life insurance for his employees since it is considered a business expense.
Which of the following is NOT true regarding penalties for violation of the rules and regulations of the Insurance Code? License may be suspended for several years Commissioner may issue a cease-and-desist order License may not be revoked Fine up to $50,000
In addition to issuing the cease-and-desist order, the Commissioner may suspend or revoke a producer's license, as well as issue monetary fines up to $50,000 for violation of the Insurance Code.
Which of the following statements is TRUE concerning irrevocable beneficiaries? They may be changed only on the anniversary date of the policy. They can be changed only with the written consent of that beneficiary. They may be changed at any time. They can never be changed.
Once irrevocable beneficiaries are indicated for the policy, their written consent is required to change the beneficiary.
The paid-up addition option uses the dividend To accumulate additional savings for retirement. To purchase a smaller amount of the same type of insurance as the original policy. To purchase a one-year term insurance in the amount of the cash value. To reduce the next year's premium.
The dividends are used to purchase a single premium policy in addition to the face amount of the permanent policy.
All of the following are qualifications of a resident producer EXCEPT Obtaining a sponsorship of an admitted insurance company. Paying a nonrefundable fee for each license. Being 18 years old. Having submitted a uniform application to the Commissioner.
The state of Indiana does not include sponsorship of admitted insurance companies on qualification requirements for resident producers. Producers do, however, need to be appointed by the Commissioner.
Which is NOT true about beneficiary designations? The policy does not have to have a beneficiary named in order to be valid. Trusts can be valid beneficiaries. The beneficiary must have insurable interest in the insured. The beneficiary may be a natural person.
A beneficiary is the person or interest to whom the policy proceeds will be paid upon the death of the insured. Beneficiaries do not have to have an insurable interest in the policyholder.
All of the following are requirements for life insurance illustrations EXCEPT They may only be used as approved. They must identify nonguaranteed values. They must differentiate between guaranteed and projected amounts. They must be part of the contract.
An illustration may not be altered by an agent and must clearly state that it is not part of the contract. It is legal to list nonguaranteed values in the contract, but they must be specifically labeled as projected, not guaranteed values.
When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following? Contract of adhesion Acceptance Consideration Legal purpose
Consideration is something of value that each party gives to the other. The consideration on the part of the insured is the payment of premium and the representations made in the application.
Which of the following is NOT true regarding a nonqualified retirement plan? It needs IRS approval. Contributions are not currently tax deductible. It can discriminate in benefits and selecting participants. Earnings grow tax deferred.
Nonqualified retirement plans do not meet the IRS requirements for favorable tax treatment of deductions and contributions; therefore, they do not need to be approved by IRS.
An insured receives an annual life insurance dividend check. What term best describes this arrangement? Accumulation at Interest Cash option Reduction of Premium Annual Dividend Provision
The cash option allows an insurer to send the policyholder an annual, nontaxable dividend check.
All of the following are qualifications of a resident producer EXCEPT Paying a nonrefundable fee for each license. Being 18 years old. Having submitted a uniform application to the Commissioner. Obtaining a sponsorship of an admitted insurance company.
The state of Indiana does not include sponsorship of admitted insurance companies on qualification requirements for resident producers. Producers do, however, need to be appointed by the Commissioner.
Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance? Disclosure rule Replacement rule Reinstatement rule Conversion rule
Anytime a new policy is issued that replaces or modifies existing insurance, a replacement form must be submitted to the ceding company.
In Indiana all of the following may act as insurance consultants EXCEPT A licensed insurance producer. A trust officer of a bank acting in the normal course of his duties. An individual who holds both the producer's and consultant's license. An attorney acting within his professional capacity.
The Insurance Code allows certain professionals, acting within the scope of their profession, to advise their clients on matters of insurance without holding an insurance license. While a producer may act as a consultant, he/she may not, however, hold both licenses at the same time.
If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select? Interest only Fixed period Life with period certain Fixed amount
Under the fixed-period installments option (also called period certain), a specified period of years is selected, and equal installments are paid to the recipient. The payments will continue for the specified period even if the recipient dies before the end of that period.
You know that your client is currently insured under a life policy, but you are making a sale presentation to that client for a new life policy. You must provide the client with the Important Notice Regarding the Replacement of Life Insurance and a copy of the sale proposal under all of the following situations EXCEPT The new policy will have a lower cash value. The client is converting from an existing term policy to whole life. The client is exchanging her whole life policy for a reduced paid-up. The client will have to borrow almost 50% of the existing policy's cash value to purchase the new policy.
When replacement is involved, the value of an existing policy is usually significantly diminished when a new policy is purchased. Converting a term policy to whole life will increase the policy value.
Which of the following statements is correct regarding a whole life policy? The policyowner is entitled to policy loans. Cash values are not guaranteed. The policy premium is based on the attained age. The death benefit may increase or decrease during the policy period.
Whole life policies offer level premium based on the issue age, guaranteed, level death benefit, cash value that is scheduled to equal the face amount at the insured's age 100, and living benefits, which include policy loans.
Which of the following best describes fixed-period settlement option? The death benefit must be paid out in a lump sum within a certain time period. Income is guaranteed for the life of the beneficiary. Both the principal and interest will be liquidated over a selected period of time. Only the principal amount will be paid out within a specified period of time.
Under the fixed-period option (also called period certain), a specified period of years is selected, and equal installments are paid to the recipient. Both the principal and interest are liquidated together over the selected period of time.
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? Dividend Accumulation option Paid-up option Accumulation at Interest Paid-up additions
With the paid-up option, the insurer can accumulate dividends at interest and then use them, in addition to interest and the policy's cash value, to pay the policy earlier than planned. This is different from paid-up additions, in which the dividends are used to buy additional policies that increase the face amount of the original policy.
The death protection component of Universal Life Insurance is always Increasing Term Annually Renewable Term Whole Life Adjustable Life
A universal policy has two components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.
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? Accumulation at Interest Paid-up additions Dividend Accumulation option Paid-up option
With the paid-up option, the insurer can accumulate dividends at interest and then use them, in addition to interest and the policy's cash value, to pay the policy earlier than planned. This is different from paid-up additions, in which the dividends are used to buy additional policies that increase the face amount of the original policy.
Which of the following is NOT the consideration in a policy? The application given to a prospective insured Something of value exchanged between parties The premium amount paid at the time of application The promise to pay covered losses
Consideration is something of value that is transferred between the two parties to form a legal contract.
If the annuitant dies during the accumulation period, who will receive the annuity benefits? The insurance company The annuitant's estate The beneficiary The annuity owner
If the annuitant dies during the accumulation period, the beneficiary receives benefits from the annuity: either the amount paid into the plan or the cash value - whichever is greater.
You know that your client is currently insured under a life policy, but you are making a sale presentation to that client for a new life policy. You must provide the client with the Important Notice Regarding the Replacement of Life Insurance and a copy of the sale proposal under all of the following situations EXCEPT The client is exchanging her whole life policy for a reduced paid-up. The client will have to borrow almost 50% of the existing policy's cash value to purchase the new policy. The new policy will have a lower cash value. The client is converting from an existing term policy to whole life.
When replacement is involved, the value of an existing policy is usually significantly diminished when a new policy is purchased. Converting a term policy to whole life will increase the policy value.
How long does the Commissioner serve in office? There is no specified length of term; the Commissioner serves at the pleasure of the Governor. The Commissioner is selected for a life term 2 years No longer than 5 years
The Commissioner is appointed by and serves at the pleasure of the Governor. He or she may be removed from office by the Governor at any time
The Federal Fair Credit Reporting Act Prevents money laundering. Regulates consumer reports. Protects customer privacy. Regulates telemarketing.
The Federal Fair Credit Reporting Act regulates consumer reports, also known as consumer investigative reports, or credit reports.
Under Rule 24, Life Insurance Solicitation, producer's duties include all of the following EXCEPT Clarifying to the applicant that the producer will be receiving a commission for the transaction. Informing the applicant of the name of the company that the producer represents. Advising the applicant that the dividends in the policy are not guaranteed. Providing the applicant with a signed copy of the Important Notice Regarding Replacement.
The Important Notice Regarding Replacement must be provided to the applicant as part of policy replacement process (Rule16.1), not insurance solicitation.
A candidate applying for which of the following licenses will NOT be required to pass a written examination? A surplus lines producer An insurance producer An insurance consultant A nonresident producer
Unless they are exempt under Indiana regulations, residents must pass a written examination when applying for an insurance producer, consultant or surplus line producer licenses. Nonresident producers do not need to fulfill prelicensing and examination requirements.
Which of the following statements about the reinstatement provision is true? It permits reinstatement within 10 years after a policy has lapsed. It provides for reinstatement of a policy regardless of the insured's health. It guarantees the reinstatement of a policy that has been surrendered for cash. It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated.
Upon policy reinstatement, the policyowner will be required to pay all back premiums plus interest, and may be required to repay any outstanding loans and interest.
Which of the following is NOT one of the three basic types of coverages that are available, based on how the face amount changes during the policy term? Renewable Decreasing Level Increasing
There are three basic types of term coverage available, based on how the face amount (death benefit) changes during the policy term: Level, Increasing, and Decreasing. Regardless of the type of term insurance purchased, the premium is level throughout the term of the policy.
Under Rule 24, Life Insurance Solicitation, producer's duties include all of the following EXCEPT Advising the applicant that the dividends in the policy are not guaranteed. Providing the applicant with a signed copy of the Important Notice Regarding Replacement. Clarifying to the applicant that the producer will be receiving a commission for the transaction. Informing the applicant of the name of the company that the producer represents.
The Important Notice Regarding Replacement must be provided to the applicant as part of policy replacement process (Rule16.1), not insurance solicitation.
All of the following could be reasons for issuing a temporary producer's license EXCEPT Licensing of new insurance producers after the business has been transferred. Training of new personnel after the producer becomes disabled. Servicing of the existing accounts until the producer returns from the Armed Forces. The sale of the insurance business due to the death of the producer.
A temporary insurance producer's license may be issued to allow for an orderly sale of the business, servicing of the existing accounts or training of new personnel to operate the business. The license, however, will expire when the business has been transferred.
All of the following could be reasons for issuing a temporary producer's license EXCEPT Training of new personnel after the producer becomes disabled. Servicing of the existing accounts until the producer returns from the Armed Forces. The sale of the insurance business due to the death of the producer. Licensing of new insurance producers after the business has been transferred.
A temporary insurance producer's license may be issued to allow for an orderly sale of the business, servicing of the existing accounts or training of new personnel to operate the business. The license, however, will expire when the business has been transferred.
To sell variable life insurance policies, an agent must receive all of the following EXCEPT FINRA registration. A securities license. A life insurance license. SEC registration.
Agents selling variable life products must be registered with FINRA, have a securities license, and must be licensed within the state to sell life insurance. SEC registration is for securities, not agents.
All of the following are dividend options EXCEPT Fixed-period installments. Accumulated at interest Reduction of premium. Paid-up additions.
Fixed-period installments is a settlement option, and not one of the dividend options.
If a company transacts any business of insurance without a certificate of authority, what is the maximum penalty that can be charged to the director of that company? Civil penalty of $25,000 $30,000 fine and a jail sentence up to 1 year $50,000 fine or the amount of commissions made, whichever is greater Up to $100,000 in fines
If a company transacts any business of insurance without a certificate, or if it transacts insurance business not specified in the company's certificate of authority, the Commissioner may impose a maximum civil penalty of $25,000 on the director or officer responsible.
All of the following are true about variable products EXCEPT The cash value is not guaranteed. Policyowners bear the investment risk. The premiums are invested in the insurer's general account. The minimum death benefit is guaranteed.
Insurers selling variable products invest their customer's monies in a separate account, which is very similar to a mutual fund. Since there is no guaranteed rate of return, customers must bear the investment risk.
