Life, Health, and Annuities License
Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?
Decreasing Term
What type of life policy has a death benefit that adjusts periodically and is written for a specific period of time?
Decreasing term
How are surrender charges deducted in a life policy with a rear-end loaded provision?
Deducted when the policy is discontinued
What is the purpose of the U.S. Patriot Act?
Detect and deter terrorism
An agent takes an individual insurance application, collects the appropriate premium, and issues the prospective insured a conditional receipt. The next step the insurance company will take is to...
Determine if the applicant is an acceptable risk by completing standard underwriting procedures
How are Roth IRA distributions normally taxed?
Distributions are received tax free
A variable insurance policy...
Dos not guarantee a return on its investment accounts
Company Z has a Cross Purchase Buy-Sell Agreement in place among its three founding partners. If the agreement is funded with individual life insurance, what would it require?
Each partner must own a policy on the other partners
Which of these statements is INCORRECT regarding the federal income tax treatment of life insurance?
Entire cash surrender value is taxable
Which of these statements describe a Modified Enodowment Contract (MEC)?
Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract
M completes an application for health insurance but does not pay the initial premium. All of these actions must occur before M's policy goes into effect EXCEPT?
Free-look period has expired
An insurance company may NOT reject a prospective insured's insurance application on the basis of which of the following factors?
Gender
In regards to representations or warranties, which of these statements is TRUE?
If material to the risk, false representations will void a policy
When must insurable interest exist for a life insurance contract to be valid?
Inception of the contract
At the the age of 45, an individual withdraws $50,000 from his Qualified Profit-Sharing Plan and then deposits this amount into a personal savings account. This action would result in:
Income tax and a 10% penalty assessed upon funds withdrawn from the Qualified Plan
A 55 year old recently received a $30,000 distribution from a previous employer's 401k plan, minus $6,000 withholding. Which federal taxes apply if none of the funds were rolled over?
Income taxes plus a 10% penalty tax on $30,000
Which of the following actions require a policyowner to provide proof of insurability in an Adjustable Life policy?
Increase face amount
Which of these actions should a producer take when submitting an insurance application to an insurer?
Inform insurer of relevant information not included on the application
What is being delivered during a policy delivery?
Insurance contract to the proposed insured
The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death is called a(n):
Insuring agreement
In a Life insurance contract, an insurance company's promise to pay stated benefits is called the:
Insuring clause
How are policyowner dividends treated in regards to income tax?
Interest on accumulations is taxed
A life insurance arrangement which circumvents insurable interest statetes is called:
Investor-Originated Life Insurance
Which of these arrangements allows one to bypass insurable interest laws?
Investor-Originated Life Insurance
Which type of life insurance beneficiary requires his/her consent when a change of beneficiary is attempted by the policyowner?
Irrevocable beneficiary
Credit Life insurance is...
Issued in an amount not to exceed the amount of the loan
Which statement regarding third-party ownership of a life insurance policy is true?
It is used extensively in estate-planning as well as business circumstances
Which of the following statements about a Variable Whole Life policy is CORRECT?
It provides a minimum guaranteed Death benefit
What type of life policy covers 2 lives and pays the face amount after the first one dies?
Joint Life Policy
A sole proprietor may use this plan ONLY if the employees of this business are included.
Keogh Pension Plan
D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed?
Level Term
Which of these are NOT an example of a Nonforfeiture option?
Life Income
Life insurance that covers an insured's whole life with level premiums paid over a limited time is called...
Limited- Pay Life
The Accelerated Death Benefit provision in a life insurance policy is also known as a(n):
Living Benefit
Which of these is NOT relevant when determining the amount of personal life insurance needed?
Local unemployment rate
An insured's inability to perform two or more activities of daily living may trigger which type of life policy rider?
Long term care
Which of these factors do NOT play a role in the underwriting of a life or health insurance policy?
Martial status
Which type of policy is considered to be overfunded, as stated by IRS guidelines?
Modified Endowment Contract
All of these insurance products require an agent to have proper FINRA securities registration in order to sell them EXCEPT for...
Modified Whole Life
K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?
Modified Whole Life
Which of these life products is not considered interest-sensitive?
Modified Whole Life
Which of these is NOT considered to be a right given to a policyowner?
Modify a provision in the insurance contraact
Which of these is NOT an element of Life insurance premiums?
Morbidity rate
Which of the following is TRUE about a qualified retirement that is "top heavy"?
More than 60% of a plan assets are in key employee accounts
When funds are shifted straight from one IRA to another IRA, what percentage of the tax is withheld?
None
In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy?
Owner's Rights
A young, married teacher has two children and owns a Whole Life policy. If the teacher wants an increasing Death Benefit to protect against inflation, the teacher should select which of the following Dividend Options?
Paid-Up Additional Insurance
Which statement is TRUE in regards to a policy loan?
Past-due interest on a policy loan is added to the total debt
A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision?
Payor Provision
A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the
Policy Loan provision
A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the...
Policy Loan provision
Which of these do NOT constitute policy delivery?
Policy issued with a rating
M has an insurance policy that also has an outstanding policy loan at the time of M's death. The insurer will deduct the outstanding loan balance from...
Policy proceeds
Who benefits in Investor-Originated Life Insurance (IOLI) when the insured dies?
Policyowner
Which is true concerning a Variable Universal Life policy?
Policyowner controls where the investment will go and selects the amount of the premium payment
Which of these characteristics is consistent with a Straight Life policy?
Premiums are payable for as long as there is insurance coverage in force
What benefit does the Payor clause on a Juvenile Life policy provide?
Premiums are waived if payor becomes disabled
Consumer reports requested by an underwriter during the application process of a health insurance policy can be used to determine...
Probability of making timely premium payments
G purchased a Family Income policy at age 40. The policy has a 20 year rider period. If G were to die at age 50, how long would G's family receive an income?
10 years
Premature IRA distributions are assessed a penalty tax of:
10%
All of the following statements about traditional individual retirement accounts are false EXCEPT:
10% penalty is applied to withdrawals before age 59 1/2
A 15 year mortgage is best protected by what kind of life policy?
15 year decreasing term
What year was the McCarran-Ferguson Act enacted?
1945
What type of policy would offer a 40 year old the quickest accumulation of cash value?
20 Pay Life
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
20 Pay Life accumulates cash value faster than Straight Life
N is a 40-year old applicant who would like to retire at age 70. He is looking to buy a life insurance policy with level premiums, permanent protection, and be paid-up at retirement. Which of these should N purchase?
30 Pay LIfe
An IRA owner can start making withdrawals and NOT be subjected to a tax penalty beginning at what age?
59 1/2
Three law partners form a Cross-Purchase Buy and Sell agreement. his agreement is funded with individual life insurance. How many total life policies are needed for this agreement?
6
How long does an individual have to "rollover" funds from an IRA or qualified plan?
60 days
Which of these is an element of a Variable Life policy?
A fixed, level premium
C is the key employee at ABC Incorporated. If a Key Employee life policy is purchased on her life, which of these statements would be ture?
ABC is the policyowner, C is the insured, and ABC is the beneficiary
Which of the following types of policies pays a benefit if the insured goes blind?
AD&D
L takes out a life insurance policy and dies 10 years later. During the claim process, the insurer discovers that L had understated her age on the application. Under the Misstatement of Age provision, the insurer will...
Adjust the death benefit to an increased amount
Which of the following statements describes what an Accident and Health policyowner may NOT do?
Adjust the premium payments
How long does the coverage normally remain on a limited-pay life policy?
Age 100
The Consideration clause in a life insurance contract contains what pertinent information?
Amount of premium payments and when they are due
An underwriter determines that an applicant's risk should be recategorized due to a health issue. This policy may be issued with...
An exclusion for the medial condition
Any changes made on an insurance application requires the initials of whom?
Applicant
Before an insurance policy is issued, which of these components of the contract is required?
Applicant's signature on application
An incomplete insurance application submitted to an insurer will result in which of these actions?
Application will be returned to the writing producer-agent
Traditional individual retirement annuity (IRA) distributions must start by:
April 1st of the year following the year the participant attains age 70 1/2
S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made?
Automatic Policy Loan
What action will an insurer take if an interest payment on a policy loan is not made on time?
Automatically add the amount of interest due to the loan balance
A Disability Income policyowner recently submitted a claim for a chronic neck problem that has now resulted in total disability. The original neck injury occurred before the application was taken 5 years prior. The neck injury was never disclosed to the insurer at the time of application. How will the insurer handle this claim?
Claim will be paid and coverage will remain in force
How do life insurance companies handle cases where the insured commits suicide within the contract's stated Contestable period?
Claims are denied under the Suicide clause of the policy
Which of these actions is taken when a policyowner uses a Life Insurance policy as collateral for a bank loan?
Collateral assignment
A Key Employee policy is taken out by Company X on its vice president. Ten years later, this employee leaves Company X and begins working for Company Y. If this individual were to die and the policy is still in force and unchanged, where would the death proceeds be directed?
Company X
The incontestable clause allows an insurer to...
Contes a claim during the contestable period
Which of the following consists of an offer, acceptance, and consideration?
Contract
Which of the following features of a group Term Life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability?
Conversion Privilege
What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability?
Convertible Term
Which statement regarding the Misstatement of Age provision is considered to be true?
Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered
All of these are considered sources of underwriting information about an applicant EXCEPT?
Rating Services
Which of these Nonforfeiture Options continue a build-up of cash value?
Reduced Paid-Up
T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this?
Renewable
Which of these terms accurately defines an underwriter's assessment of information on an insurance application?
Risk classification
Post-tax dollar contributions are found in:
Roth IRA investments
What is the Suicide provision designed to do?
Safeguard the insurer from an applicant who is contemplating suicide
P is a producer who notices 5 questions on a health application were not answered. What actions should P take?
Set up a meeting with the applicant to answer the remaining questions
Which of the following BEST describes a warranty?
Statement guaranteed to be true
K is shopping for a permanent life insurance policy that will offer her the MOST protection per dollar of annual premium. Which of these policies best fits her needs?
Straight Life
Which of the following statements about the classification of applicants is false?
Substandard applicants are never declined by underwriters
T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of $10,000 policy should T purchase?
Ten-Year Endowment
What type of life insurance are credit policies issued as?
Term
What type of life insurance gives the greatest amount of coverage for a limited period of time?
Term Life
What kind of life insurance product covers children under their parent's policy?
Term rider
Which of these life insurance riders allows the applicant to have excess coverage?
Term rider
Which of the following is TRUE if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made?
The account can be rolled into the surviving spouse's IRA
An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to...
The applicant's physician
The investment gains from a Universal Life Policy usually go toward...
The cash value
The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured's original age is...
The cost
A policy of adhesion can only be modified by whom?
The insurance company
J, an Accidental Death and Dismemberment (AD&D) policy holder, dies after injuries sustained in an accident. J's age as stated on the application 5 years ago was found to be understated by 10 years. Which of the following actions will the insurance company take?
The insurer will adjust the benefit to what the premiums paid would have purchased at the insured's actual age
All of these statements about Equity Indexed Life Insurance are correct EXCEPT...
The premiums can be lowered or raised, based on investment performance
What is considered a valid reason for small businesses to insure the lives of its major shareholders?
fund a buy-sell agreement
A life insurance policy would be considered a wagering contract WITHOUT:
insurable interest
When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have:
insurable interest in the proposed insured
Who has the option to renew a Renewable Term policy?
insured
Dividends paid from a life insurance policy are
issued by the insurer
How does a typical Variable Life Policy investment grow?
Through mutal funds, stocks, bonds
What type of reinsurance contract involves two companies automatically sharing their risk exposure?
Treaty
S, age 40, is looking to buy a Life Insurance policy that will allow for increases or decreases in coverage as his needs change. The policy best suited for S would be
Universal Life
What type of life insurance incorporates flexible premiums and an adjustable death benefit?
Universal Life
When is the face amount paid under a Joint Life and Survivor policy?
Upon death of the last insured
A life policy with a death benefit that can fluctuate accodrinf to the performance of its underlying investment portfolio is referred to as...
Variable Life
Which policy requires an agent to register with the National Association of Securities Dealers ( NASD) before selling?
Variable Life
A(n) Life policy combines investment choices with a form of Term coverage
Variable Universal
Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?
Variable Universal Life
When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?
Void the policy only if it is discovered during the Contestable period and proven to be material
Which of these is considered a statement that is assured to be true in every respect?
Warranty
If the initial premium is not collected during the application process, when does an insurance contract become effective?
When the agent delivers the policy and collects the initial premium
When must insurable interest be present in order for a life insurance policy to be valid?
When the application is made
At what point does a Whole Life Insurance policy endow?
When the cash value equals the death benefit
An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?
When the conditions of the receipt are met
When is the face amount of a Whole Life policy paid?
When the insured dies or at the policy's maturity date, whichever happens first
What does the ownership clause in a life insurance policy state?
Who the policyowner is and what rights the policyowner is entitled to
A life insurance policy that provides a policyowner with cash value along a level face amount is called...
Whole life
What type of insurance offers permanent life coverage with premiums that are payable for life?
Whole life insurance
Q would like to purchase $100,000 of permanent protection on his wife and $50,000 of Term coverage on himself under the same policy. What kind of policy should Q purchase?
Whole life policy with other insured rider
A contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of
adhesion
When does a Guaranteed Insurability Rider allow the insured to buy additional coverage?
at future dates specified in the contract with no evidence of insurability required
The Automatic Premium Loan provision is designed to:
avoid a policy lapse
Variable Whole Life Insurance can be described as:
both an insurance and securities porduct
An employer that offers a qualified retirement plan to its employees is eligible to:
make tax deductible contributions to the plan
A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid:
mandatory income tax withholding on the transfer amount
Which of these is NOT considered to be an element of an insurance contract?
negotiating
All of the following statements are true regarding a policy's Grace period, EXCEPT
past due premiums are waived
Dividends payable to a policyowner are
declared by the insurance company
The has the right to change a life insurance policy's beneficiary.
policyowner
The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called:
reserves
Typically a life insurance death benefit is paid by a lump-sum payment. A(n) option is a method of distributing a Life Insurance policy's death benefit OTHER than by a lump sum payment.
settlement
The premiums paid by an employer for his employee's group life insurance are usually considered to be:
tax-deductible to the employer
In order for coverage on a non-medical insurance application to take effect the same day, the producer must collect a signed application and...
the initial premium
The amount of coverage on a group credit life policy is limited to:
the insured's total loan value
The advantage of reinstating an original life policy is
the premiums are based on a younger age
Stranger-Owned Life Insurance (STOLI) is when a person purchases life insurance only to sell to a(n):
third-party with no insurable interest
If a 10 Year Term Life policy contains a Renewability provision, the policy will renew
without evidence of insurability
What type of employee welfare plans are not subject to ERISA regulations?
Church plans
An individual working part-time has an annual income of $25,000. If this individual has an IRA, what is the maximum deductible IRA contribution allowable?
$2,500
K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
$20,000 death benefit
J has an Accidental Death and Dismemberment policy with a principal sum of $50,000. While trimming the hedges, J cuts off one of his fingers. What is the MAXIMUM J will receive from his policy?
$25,000
T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. 5 years later, T commits suicide. How much will the insurer pay?
$50,000
P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresenatations made by P during the application process. Which of these actions will the insurer take?
Beneficiary will be paid the Death Benefit
S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCPET...
Beneficiary's age
All of the following are considered to be typical characteristics describing the nature of an insurance contract, EXCEPT:
Bilateral
Which statement about a whole life policy is correct?
Cash value may be borrowed against
What does the Medical Information Bureau (MIB) idnetify?
Existing life insurance coverage with other carriers
Term insurance has which of the following characteristics?
Expires at the end of the policy period
D owns a Whole Life policy that was purchased 10 years ago. If the premium payments suddenly stop and D takes no additional action, which Nonforfeiture Option will the insurer likely proceed with?
Extended term
All of these are characteristices of an Adjustable Life policy EXCEPT...
Face amount can be adjusted using policy dividends
What does a Face Amount Plus Cash Value Policy supposed to pay at the insured's death?
Face amount plus the policy's cash value
From what authority derives the requirement that an insurance application contains a disclosure stating that an investigative consumer report may be obtained on an applicant?
Fair Credit Reporting Act
What is the name of the law that requires insurers to disclose information gathering practices and where the information was obtained?
Fair Credit Reporting Act
Which Federal law allows an insurer to obtain an inspection report on a potential insured?
Fair Credit Reporting Act
What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies?
Family Maintenance Policy
What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years?
Family Maintenance Policy
What kind of special need would a policyowner require with an Adjustable Life insurance policy?
Flexible premiums
What action should a producer take if the initial premium is, NOT submitted with the application?
Forward the application to the insurer without the initial premium