Life insurance
A producer licensed in Pennsylvania must notify the Insurance Department of any change of address in his or her residence or business address within how many days? a) 30 b) 10 c) 15 d) 20
a) 30 Every producer licensed in Pennsylvania must notify the Insurance Department in writing, within 30 days, of any change of address in his or her residence or business address. The producer must also notify all the entities for which the producer holds an appointment.
If a licensed person is moving to Pennsylvania, he or she may become licensed as a resident if they submit a completed application within how many days of establishing residence in Pennsylvania with proof of licensing from their prior home state? a) 90 b) 180 c) 30 d) 60
a) 90 Nonresident producers may become resident producers if they submit a completed application within 90 days of establishing residence in Pennsylvania with proof of licensing from their prior home state.
A person applying for a manager or exclusive general agent license must meet all of the following criteria EXCEPT a) Be responsible for at least 25% of total commissions collected by the office that he or she manages. b) Have an authority to act on the insurer's behalf. c) Be found sufficiently fit, competent and reliable by the Department of Insurance. d) Have paid all applicable fees.
a) Be responsible for at least 25% of total commissions collected by the office that he or she manages. Those applying for a manager or exclusive general agent license must meet all of the criteria listed above except a set share of sales.
The insurance code identifies all of these as prohibited acts that can cause suspension, revocation or denial of an insurance producer license for a licensee or applicant, with the exception of a) Commission of any misdemeanor. b) Failing to pay state income taxes. c) Failing to pay child support obligations. d) Commission of a felony or its equivalent.
a) Commission of any misdemeanor. Only the commission of misdemeanors that involve the misuse or theft of money or property belonging to others will affect the maintenance or obtaining of an insurance producer license.
Items stipulated in the contract that the insurer will not provide coverage for are found in the a) Exclusions clause. b) Insuring clause. c) Benefit Payment clause. d) Consideration clause.
a) Exclusions clause. Exclusions are restrictions of coverage as stated in the policy.
When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called a(n) a) Executive bonus. b) Key person policy. c) Fraternal association. d) Aleatory contract.
a) Executive bonus. When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called an executive bonus.
Which policy component decreases in decreasing term insurance? a) Face amount b) Cash value c) Dividend d) Premium
a) Face amount Decreasing term policies feature a level premium and a death benefit that decreases each year over the duration of the policy term.
Which of the following is NOT true regarding a Certificate of Authority? a) It is issued to group insurance participants. b) It may be necessary for transacting business in a specific state. c) It is equivalent to an insurance license. d) It is issued by the state department of insurance.
a) It is issued to group insurance participants. Before insurers may transact business in a specific state, they must apply for a license or Certificate of Authority from the state department of insurance and meet any financial (capital and surplus) requirements set down by the state.
Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client? a) Limited pay whole life b) Interest-sensitive whole life c) Life annuity with period certain d) Increasing term
a) Limited pay whole life Premium payments will cease at her age 65, but coverage will continue to her death or age 100.
An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied? a) Material misrepresentation b) Waiver c) Utmost Good Faith d) Estoppel
a) Material misrepresentation A material misrepresentation will affect whether or not a policy is issued. If the insured had been truthful, it is very likely that the policy would not be issued.
Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? a) Option B b) Corridor option c) Variable option d) Option A
a) Option B Under Option B the death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases. At any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value.
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? a) Payor Benefit b) Jumping Juvenile c) Juvenile Premium Provision d) Waiver of Premium
a) Payor Benefit If the payor (usually a parent or guardian) becomes disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches a certain age, such as 21.
The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change? a) The death benefit can be increased by providing evidence of insurability. b) The death benefit cannot be increased. c) The death benefit can be increased only when the policy has developed a cash value. d) The death benefit can be increased only by exchanging the existing policy for a new one.
a) The death benefit can be increased by providing evidence of insurability. The policyowner (insured) would need to prove insurability for the amount of the increase.
All of the following are true of an annuity owner EXCEPT a) The owner must be the party to receive benefits. b) The owner pays the premiums on the annuity. c) The owner has the right to name the beneficiary. d) The owner is the party who may surrender the annuity.
a) The owner must be the party to receive benefits. The "owner" is the person who purchases the contract and has all of the rights such as naming the beneficiary and surrendering the annuity. The owner, however, does not have to be the one who receives the benefits; it could be the annuitant (if different from the owner) or the beneficiary.
For what reason may a life insurance producer backdate a life insurance policy? a) To avoid an increase in premium rate for the insured b) To meet sales quotas established by the insurer c) To make a policy effective during a period when the agent's appointment was in force d) To shorten the period of contestability
a) To avoid an increase in premium rate for the insured Agents may backdate policies up to 6 months in order to obtain a better premium rate for the insured.
What is the civil penalty for the first violation of the Pennsylvania Insurance Fraud Prevention Act? a) $1,000 b) $5,000 c) $10,000 d) $15,000
b) $5,000 The civil penalty for violation the Pennsylvania Insurance Fraud Prevention Act is up to $5,000 for the first violation, $10,000 for the second violation, and $15,000 for each subsequent violation.
If an insurer terminates a producer's appointment, the Commissioner must be notified within how many days? a) 10 b) 30 c) 60 d) 90
b) 30 Every insurer authorized to transact business in Pennsylvania must notify the Insurance Department of all appointments and terminations of appointments of producers in the format and within the time frame required by the Commissioner. Termination of appointment shall be provided to the department in writing on an approved form or through an approved electronic process within 30 days following the effective date of the termination.
All other factors being equal, the least expensive first-year premium payment is found in a) Level Term. b) Annually Renewable Term. c) Increasing Term. d) Decreasing Term.
b) Annually Renewable Term. Annually renewable term is the purest form of term insurance. The death benefit remains level, but the premium increases each year with the insured's attained age. In decreasing policies, while the face amount decreases, the premium remains constant throughout the life of the contracts. In level term and increasing term policies, the premium also remains level for the term of the policy. Therefore, in the other types of level policies, the first-year premium would not be different from any other year.
All of the following are personal uses of life insurance EXCEPT a) Cash accumulation. b) Buy-sell agreement. c) Survivor protection. d) Estate creation.
b) Buy-sell agreement. Personal uses of life insurance include survivor protection, estate creation and conservation, cash accumulation, and liquidity. A buy-sell agreement is for business uses of life insurance.
A business owner was trying to obtain a bank loan to fund the purchase of a new business facility, but the bank required proof of additional assets to secure the loan. The business owner then decided to use her $250,000 life insurance policy to secure the loan. Which provision makes this possible? a) Ownership provision b) Collateral assignment c) Insurable interest d) Modification clause
b) Collateral assignment The business owner could make a collateral assignment of his or her life insurance policy to the bank.
Which of the following is NOT an example of insurable interest? a) Child in parent b) Debtor in creditor c) Business partners in each other d) Employer in employee
b) Debtor in creditor The three recognized areas in which insurable interest exists are as follows: a policyowner insuring his or her own life, the life of a family member (relative or spouse), or the life of a business partner, key employee, or someone who has a financial obligation to them. A debtor does not have an insurable interest in the creditor.
Which of the following terms describes making false statements about the financial condition of any insurer that are intended to injure any person engaged in the business of insurance? a) Slandering b) Defamation c) Undercutting d) Twisting
b) Defamation Defamation is making statements that are false as to the financial condition of any insurer and which are calculated to injure any person engaged in the business of insurance.
Which of the following is true regarding the spendthrift clause in life insurance policies? a) It is the same as irrevocable settlement clause. b) It can protect the policy proceeds from creditors of the beneficiary. c) It allows the beneficiary to select a different settlement option. d) It is only used when the beneficiary is a minor.
b) It can protect the policy proceeds from creditors of the beneficiary. The spendthrift clause in a life insurance policy prevents the beneficiary's reckless spending of benefits, and protects the policy proceeds from creditors of the beneficiary or policyowner.
Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value? a) Effect of inflation on income over time. b) Predicted needs of the family after the insured's death. c) Insured's current and future income. d) Insured's annual expenses.
b) Predicted needs of the family after the insured's death. The Human Life Value Approach to determining the value of an individual's life requires the calculation of probable future earnings of the insured, which involves wages, expenses, inflation, amount of time until retirement, and the time value of money. Predicted needs of the family after the insured's death are used in the needs approach.
The risk of loss may be classified as a) High risk and low risk. b) Pure risk and speculative risk. c) Certain risk and uncertain risk. d) Named risk and un-named risk.
b) Pure risk and speculative risk. Pure risks involve the probability or possibility of loss with no chance for gain. Pure risks are generally insurable. Speculative risks involve uncertainty as to whether the final outcome will be gain or loss. Speculative risks are generally uninsurable.
Annuities can be used to fund which of the following? a) Estate creation b) Retirement plans c) Variable life insurance d) Group life insurance Since annuities are a popular means to provide retirement income, they are often used to fund qualified retirement plans.
b) Retirement plans Since annuities are a popular means to provide retirement income, they are often used to fund qualified retirement plans.
Which of the following determines the length of time that benefits will be received under the Fixed-Amount settlement option? a) Amount of interest b) Size of each installment c) Predetermined length of time stated in the contract d) Length of income period
b) Size of each installment 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 p
Which of the following statements is correct about a standard risk classification in the same age group and with similar lifestyles? a) Standard risk is also known as high exposure risk. b) Standard risk is representative of the majority of people. c) Standard risk pays a higher premium than a substandard risk. d) Standard risk requires extra rating. Standard risks are representative of the majority of people in their age and with similar lifestyles. They are the average risk.
b) Standard risk is representative of the majority of people. Standard risks are representative of the majority of people in their age and with similar lifestyles. They are the average risk.
Traditional IRA contributions are a) Partially tax deductible depending on the income level. b) Tax deductible. c) Deducted based on the income level. d) Never tax deductible.
b) Tax deductible. The following taxation rules apply to contributions made to traditional IRA plans: tax-deductible contributions for the year of the contribution (based on the person's income); contributions must be made in "cash" in order to be tax deductible; excess contributions are taxed at 6% per year as long as the excess amounts remain in the IRA; and tax-deferred earnings are not taxed until withdrawn.
The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPT a) Face amount of the policy. b) The insured's age at death. c) The beneficiary's life expectancy. d) Projected interest rates.
b) The insured's age at death. The insured's age at death will not be considered, but the longer the life expectancy of the recipient, the lower the payments will be.
What is the civil penalty for violating a cease and desist order of the Commissioner? a) $1,000 b) $5,000 c) $10,000 d) $50,000
c) $10,000 A penalty of up to $10,000 may be leveled for each violation of the Commissioner's cease and
An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement? a) $0 b) $100,000 c) $200,000 d) $100,000 plus the total of paid premiums
c) $200,000 The beneficiary would most likely receive twice the face value of the policy, since his fatal injuries were caused by an accident and he died within the 90-day benefit limit stipulated in most policies.
A Straight Life policy has what type of premium? a) A decreasing annual premium for the life of the insured b) A variable annual premium for the life of the insured c) A level annual premium for the life of the insured d) An increasing annual premium for the life of the insured
c) A level annual premium for the life of the insured Straight Life policies charge a level annual premium for the lifetime of the insured and provide a level, guaranteed death benefit.
Level term insurance provides a level death benefit and a level premium during the policy term. If the policy renews at the end of a specified period of time, the policy premium will be a) Based on the issue age of the insured. b) Discounted. c) Adjusted to the insured's age at the time of renewal. d) Determined by the health of the insured.
c) Adjusted to the insured's age at the time of renewal. If a level term product is renewed at the end of the term period the premium will be based upon the attained age of the insured.
How are state Insurance Guaranty Associations funded? a) By NAIC b) By the Government c) By their members - authorized insurers d) By the Department of Insurance
c) By their members - authorized insurers Guaranty Associations are funded by their members: all authorized insurers are required to contribute to a fund to provide for the payment of claims for insolvent insurers.
If an insured changes his payment plan from monthly to annually, what happens to the total premium? a) Doubles b) Increases c) Decreases d) Stays the same
c) Decreases Because the insurer would have the entire premium to invest for a full year, they would reduce the premium amount.
An annuity owner is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that will equal the performance of the Standard and Poor's 500 Index. She would likely purchase a(n) a) Flexible Annuity. b) Immediate Annuity. c) Equity Indexed Annuity. d) Variable Annuity.
c) Equity Indexed Annuity. The interest rates of Equity Indexed Annuities are tied to the Standard and Poor's Index.
Which of the following entities protects policyowners, insureds, and beneficiaries under insurance contracts when insurers fail to perform contractual obligations due to financial impairment? a) Insurance Solvency Association b) Consumer Protection Agency c) Insurance Guaranty Association d) Insurance Consumer Protectorate
c) Insurance Guaranty Association Guaranty Associations are created to protect policyowners, insureds, and beneficiaries under life insurance policies, health insurance policies, annuity contracts, and supplemental contracts when insurers fail to perform contractual obligations due to financial impairment.
In which of the following situations is it legal to limit coverage based on marital status? a) Legal separation during the application process b) Divorce within the last six months of applying for insurance c) It is never legal to limit coverage based on marital status. d) Excessive number of divorces, as defined by the Insurance Code
c) It is never legal to limit coverage based on marital status. Availability of insurance benefits or coverage may not be denied based on sex or marital status. Marital status may be considered for the purpose of defining persons eligible for dependent benefits.
If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insured, it is called a a) Deferred annuity. b) Pure annuity. c) Joint life annuity. d) Joint and survivor annuity.
c) Joint life annuity. Joint life annuity settlement option pays benefits to two or more annuitants, but stops upon the death of the first.
Which of the following is an example of a limited-pay life policy? a) Level Term Life b) Straight Life c) Life Paid-up at Age 65 d) Renewable Term to Age 70
c) Life Paid-up at Age 65 Limited Pay Whole Life premiums are all paid by the time the insured reaches age 65. The policy endows when the insured turns 100. It is the premium paying period that is limited, not the maturity.
After a back injury, an insured is disabled for a year. His insurance policy carries a Disability Income Benefit rider. Which of the following benefits will he receive? a) Payments for life b) Yearly premium waiver and income c) Monthly premium waiver and monthly income d) Percentage of medical costs paid by the insurer
c) Monthly premium waiver and monthly income The Disability Income Benefit rider waives the policy premiums, just like the Waiver of Premium rider. Unlike the Waiver of Premium rider, it also allows the insured to receive a weekly or monthly income during the disability period.
If an agent fails to obtain an applicant's signature on the application, the agent must a) Sign the application, stating it was by the agent. b) Send the application to the insurer with a note explaining the absence of signature. c) Return the application to the applicant for a signature. d) Sign the application for the applicant.
c) Return the application to the applicant for a signature. All applications must have the appropriate authorized signatures.
Which of the following statements about a suicide clause in a life insurance policy is TRUE? a) Suicide is covered as long as the policy is in force. b) Suicide is excluded as long as the policy is in force. c) Suicide is excluded for a specific period of years and covered thereafter. d) Suicide is covered for a specific period of years and excluded thereafter.
c) Suicide is excluded for a specific period of years and covered thereafter. In most states, if death results from suicide within a certain period, the insurer is not obligated to pay the death benefit.
Which of the following is an example of liquidity in a life insurance contract? a) The flexible premium b) The money in a savings account c) The cash value available to the policy owner d) The death benefit paid to the beneficiary
c) The cash value available to the policy owner Liquidity in life insurance refers to availability of cash to the insured. Some life insurance policies offer cash values that can be borrowed at any time and used for immediate needs.
In insurance, an offer is usually made when a) The agent hands the policy to the policyholder. b) An agent explains a policy to a potential applicant. c) The completed application is submitted. d) The insurer approves the application and receives the initial premium.
c) The completed application is submitted. 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.
When a fixed annuity owner pays pays a monthly annuity premium to the insurance company, where is this money placed? a) Each contract's separate account b) The annuity owner's account c) The insurance company's general account d) Forwarded to an investor
c) The insurance company's general account Fixed annuities guarantee a minimum amount of interest to be credited to the purchase payment. The insurance company can afford to make guarantees because the money of a fixed annuity is placed in the general account of the insurance company, which is part of its investment portfolio. The company makes conservative enough investments to insure a guaranteed rate to the annuity owners.
All of the following statements are true regarding installments for a fixed amount EXCEPT a) This option pays a specific amount until the funds are exhausted. b) The annuitant may select how big the payments will be. c) The payments will stop when the annuitant dies. d) Value of the account and future earnings will determine the time period for the benefits.
c) The payments will stop when the annuitant dies. Installments for a fixed amount option has no life contingencies. A specific amount of benefits will be paid until funds are exhausted whether or not the annuitant is living.
Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE? a) Policy loans are taxable distributions. b) Accumulations are tax deferred. c) Withdrawals are not taxable. d) Distributions before age 59 1/2 incur a 10% penalty on policy gains. Any distributions from MECs are taxable, including withdrawals and policy loans. All of the other statements are true.
c) Withdrawals are not taxable. Any distributions from MECs are taxable, including withdrawals and policy loans. All of the other statements are true.
At the time of initial licensing, what fee must a viatical settlement provider pay? a) $50 b) $100 c) $200 d) $300
d) $300 Viatical settlement providers must pay a fee of $300 at the time of their initial and renewal applications.
How long does a temporary producer's license last for the surviving spouse of a deceased producer? a) 1 year b) 90 days c) 150 days d) 180 days
d) 180 days Temporary producer licenses may be granted for 180 days.
What is the waiting period on a Waiver of Premium rider in life insurance policies? a) 30 days b) 3 months c) 5 months d) 6 months
d) 6 months Most insurers impose a 6-month waiting period from the time of disability until the first premium is waived.
What is a foreign insurer? a) An insurer with licensed agents who are citizens in more than one country b) An insurer with a home office in another state c) An insurer with a home office in another country d) An insurer with licensed agents doing business in other countries
d) An insurer with licensed agents doing business in other countries A domestic insurer's home office is in this state, a foreign insurer's is in another state, and an alien insurer's is in another country.
Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement? a) Term insurance only b) Permanent insurance only c) Universal life insurance only d) Any form of life insurance
d) Any form of life insurance Any form of Life insurance may be used to fund a buy-sell agreement.
An underwriter is reviewing the medical questions in the application and needs further information due to a medical situation the applicant had in the past. What will the underwriter require? a) A complete medical record b) Sworn health affidavit from the applicant c) Statement of Continued Good Health d) Attending Physician Statement
d) Attending Physician Statement The APS is used to obtain medical DETAILS about a specific condition which has shown up in the application; the insurance company orders the information directly from the physician, using a signed authorization which was part of the application.
A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision? a) Waiver of premium b) Incontestability period c) Assignment d) Automatic premium loan
d) Automatic premium loan This provision is not required, but is commonly added to contracts with a cash value at no additional charge. This is a special type of loan that prevents the unintentional lapse of a policy due to nonpayment of the premium.
A producer's license must be renewed a) Every 3 years. b) Every 5 years. c) Annually. d) Biennially.
d) Biennially. A producer's license may be renewed biennially (every 2 years).
How are the variable annuities regulated? a) By the National Association of Securities Dealers b) By the Commissioner of Insurance c) By the Department of Insurance d) By state and federal agencies
d) By state and federal agencies Variable annuities are considered securities and are regulated by various state and federal agencies, including the SEC, the FINRA (formerly NASD) and the state Department of Insurance.
An insured receives an annual life insurance dividend check. What term best describes this arrangement? a) Reduction of Premium b) Annual Dividend Provision c) Accumulation at Interest d) Cash option
d) Cash option The cash option allows an insurer to send the policyholder an annual, nontaxable dividend check.
All of the following are duties and responsibilities of producers at the time of application EXCEPT a) Explain the nature and type of any receipt the producer is giving to the applicant. b) Probe beyond the stated questions if the producer feels the applicant is misrepresenting or concealing information. c) Check to make sure that there are no unanswered questions on the application. d) Change any incorrect statement on the application by personally initialing next to the corrected statement.
d) Change any incorrect statement on the application by personally initialing next to the corrected statement. Any changes to information on an application must be initialed by the applicant.
A producer who fails to segregate premium monies from his own personal funds is guilty of a) Larceny. b) Embezzlement. c) Theft. d) Commingling. It is illegal for insurance producers to commingle premiums collected from the applicants with their own personal funds.
d) Commingling. It is illegal for insurance producers to commingle premiums collected from the applicants with their own personal funds.
The death benefit in a variable universal life policy a) Is guaranteed to be higher than when the policy is originally issued. b) Is fixed. c) Always equals the face amount stated in the policy. d) Depends on the performance of a separate account.
d) Depends on the performance of a separate account. The death benefit is not fixed, and may increase or decrease over the life of the policy depending on the investment performance of the underlying sub-account. It cannot, however, decrease below the initial face amount of the policy.
According to the nonforfeiture law, if the owner decides to surrender a deferred annuity prior to annuitization, the owner is entitled to which of the following? a) No payments b) Annuity dividends c) Full premium refund without any charges d) Guaranteed surrender value
d) Guaranteed surrender value The nonforfeiture law stipulates that a deferred annuity must have a guaranteed surrender value that is available if the owner decides to surrender the annuity prior to annuitization
What do individuals use to transfer their risk of loss to a larger group? a) Insurable interest b) Exposure c) Indemnity d) Insurance
d) Insurance Insurance is the mechanism whereby an insured is protected against loss by a specified future contingency or peril in return for the present payment of premium. Because many other individuals with the same or similar risk of loss are paying premiums, funds are available to indemnify those who actually suffer that loss.
When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy? a) It is increased when extra premiums are paid. b) It decreases over the term of the policy. c) It remains the same as the original policy, regardless of any differences in value. d) It is reduced to the amount of what the cash value would buy as a single premium.
d) It is reduced to the amount of what the cash value would buy as a single premium. In a reduced paid-up policy, the original policy's cash value is used as single premium to pay for a permanent policy with a reduced face amount from the original, hence the name. The new policy accumulates in cash value until its maturity or the insured's death.
Which of the following statements about the reinstatement provision is true? a) It permits reinstatement within 10 years after a policy has lapsed. b) It provides for reinstatement of a policy regardless of the insured's health. c) It guarantees the reinstatement of a policy that has been surrendered for cash. d) It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated.
d) 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.
A couple near retirement is planning for their golden years. They want to make sure that their retirement annuity provides monthly benefits for the rest of their lives. Should one of them die, the other would still like to continue receiving benefits. Which settlement option should they choose? a) Joint life b) Life with period certain c) Straight life d) Joint and Survivor
d) Joint and Survivor Joint & Survivor option guarantees an income for two or more recipients that none of them can outlive.
Which of the following is usually true of a participating life insurance policy? a) May be converted to a term life policy. b) Pays dividends to stockholders. c) Assesses premiums against stockholders. d) Pays dividends to policyowners.
d) Pays dividends to policyowners. Participating is a term used to refer to any insurance policy that distributes its dividends by cash payments, reduced premiums, units of paid-up life insurance, a savings program, or by the purchase of term insurance.
An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called a) Modified Endowment Contract (MEC). b) Level term life. c) Graded premium whole life. d) Single premium whole life.
d) Single premium whole life. Single premium whole life requires the entire premium to be paid in one lump sum at the policy's inception.
All of the following would be different between qualified and nonqualified retirement plans EXCEPT a) Taxation of withdrawals b) Taxation of contributions c) IRS approval requirements d) Taxation on accumulation
d) Taxation on accumulation Taxation on accumulation is deferred in both types of plans. The rest of the characteristics would differ.
Which of the following entities established the Do-Not-Call Registry? a) The Better Business Bureau b) The NAIC c) The Consumer Protection Agency d) The Federal Trade Commission
d) The Federal Trade Commission The FTC established the do-not-call list in order to protect consumers against unwanted solicitations.
Which of the following statements about group life is correct? a) The premiums are higher than in an individual policy because there is no medical exam. b) The group sponsor receives a Certificate of Insurance. c) The policy can be converted to an individual term insurance policy. d) The cost of coverage is based on the ratio of men and women in the group.
d) The cost of coverage is based on the ratio of men and women in the group. Group life insurance can be converted to an individual whole life, not a term, policy; the group life insurance premiums are usually lower than those of an individual policy; the group sponsor receives a master contract, while the participants receive certificates of insurance. The cost of the coverage is based on the average age of the group and the ratio of men to women.
In terms of parties to a contract, which of the following does NOT describe a competent party? a) The person must have at least completed secondary education. b) The person must not be under the influence of drugs or alcohol. c) The person must be of legal age. d) The person must be mentally competent to understand the contract.
d) The person must be mentally competent to understand the contract. The parties to a contract must be capable of entering into a contract in the eyes of the law. Generally, this requires that both parties be of legal age, mentally competent to understand the contract, and not under the influence of drugs or alcohol.
The owner of a life insurance policy wishes to name two beneficiaries for the policy proceeds. What will the soliciting insurance producer say? a) The way proceeds are split between beneficiaries is decided by which type of policy is chosen. b) Life insurance policies may have only one beneficiary. c) The proceeds will be split evenly between the two beneficiaries. d) The policyowner can specify the way proceeds are split in the policy.
d) The policyowner can specify the way proceeds are split in the policy. The owner of a life insurance policy may name any individual as a beneficiary for the policy proceeds. The owner may name more than one individual, in which case the individual beneficiaries will split the benefit by the percentage specified in the policy.
An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have? a) Adjustable life b) Term life c) Limited pay d) Universal life
d) Universal life Universal Life policies allow for policyholders to withdraw a limited portion of the policy's cash value. Each withdrawal, however, is usually charged, and the amount and frequency of withdrawals are usually limited.
Which of the following would least likely be considered a legitimate need that would be paid by insurance proceeds? a) Travel expenses for family to come to the funeral b) Debt cancellation c) Day care d) Vacation travel expenses
d) Vacation travel expenses There are many legitimate need-based expenses that can be paid by life insurance proceeds, from groceries to retirement income. Vacation travel expenses are most likely to be considered a luxury and not a need.
An insured receives a monthly summary for his life insurance policy. He notices that the cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have? a) Term b) Securities c) Stock d) Variable
d) Variable Variable life policies vary in value, as the name suggests, because the value is based on the stocks that support the policy. If a policyholder wants a more stable, reliable value, he/she should invest in a fixed policy.
