Life insurance exam
Which of the following is TRUE about a class designation?
beneficiaries are not identified by name
Which of the following best describes taxation during the accumulation period of an annuity?
taxes r deferred
A policyowner cancels his life policy but instructs the insurance company to transfer the cash value of his policy to an annuity. This nontaxable transaction is called
1035 exchange
The hearing for a cease and desist order must occur within how many days of the order date?
15 days
Which of the following is an example of a limited-pay life policy?
Life paid-up @ age 65
An insured with a life insurance policy is diagnosed with a terminal illness. Which of the following could be a suitable option for this insured? (Choose from the following options) 1. Policy replacement 2. Change of beneficiary 3. Viatical settlement 4. Policy loan
3.
What is the waiting period on a Waiver of Premium rider in life insurance policies?
6 months
What's the length of time a policy may be back dated
6 months
In a roth IRA, who's allowed to make contributions and what age do distributions have to begin?
-ANYONE is allowed to make contributions regardless of the account owner's age -No required age for distribution to start
What is a foreign insurer?
An insurer with a home office in another state
All advertisements are the responsibility of the
Insurer
What method do insurers use to protect themselves against catastrophic losses?
reinsurance
The term "illustration" in a life insurance policy refers to
1. A presentation of nonguaranteed elements of a policy.
A Straight Life policy has what type of premium?
A level annual premium for the life of the insured
What happens before director suspends, revokes, or refuses to issue/renew a V.S. license?
Director must provide notice to viatical settlement provider by certified mail by providing license w/ an opportunity for a HEARING
If an insured surrenders his life insurance policy, which statement is true regarding the cash value of the policy?
It is only taxable if the cash value exceeds the amount paid for premiums.
Which of the following is true about the premium on the children's rider in a life insurance policy? (Choose from the following options)1. It decreases when an adopted child is added to the policy. 2. It remains the same no matter how many children are added to the policy. 3. It decreases when the oldest child reaches the age of 21. 4. It increases when a newborn baby is added to the policy.
It remains the same no matter how many children are added to the policy.
Juvenile Life (aka Jumping Juvenile) policy
Policy covering minor child; premium fixed but death benefit increases by 5 times @ age 18 or 21.
.All of the following actions can be described as twisting EXCEPT (Choose from the following options) 1. Making an incomplete comparison between the existing and proposed policies 2. Explaining to client the advantages of permanent insurance over term and suggesting changing policies 3. Misrepresenting the terms and conditions of the existing policy to make the new one more attractive 4. Embellishing the terms of the proposed policy in order to convince the insured to switch
1.
All of the following are true regarding rebates EXCEPT (Choose from the following options) 1. Rebates are allowed if it is in the best interest of the client .2. Rebates are only allowed if specifically stated in the policy. 3. Rebating can be anything of monetary value given as an inducement to purchase insurance. 4. Dividends are not considered to be rebates.
1.
Which is the primary source of information used for insurance underwriting?
1. Application
Which of the following is true regarding a single life settlement option?
1. It provides income the beneficiary cannot outlive.
In an annuity, the accumulated money is converted into a stream of income during which time period?
2. Annuitization period
All of the following are personal uses of life insurance EXCEPT 1. Cash accumulation. 2. Buy-sell agreement. 3. Survivor protection. 4. Estate creation.
2. Buy-sell agreement.
When would life insurance policy proceeds be included in the insured's taxable estate? (Choose from the following options) 1. If the insured transfers ownership of the policy or makes a gift of the policy 5 years prior to his or her death 2. When the beneficiary is named in the policy 3. When there are any incidents of ownership at the time of death 4. If the insured's spouse is the policyowner
3.
If an insured continually uses the automatic premium loan option to pay the policy premium,
3. The policy will terminate when the cash value is reduced to nothing.
If an agent has an administrative action taken against him or her in another jurisdiction, how many days does the agent have to report this to the Director after the final disposition?
30 days
What type of insurance would be used for a Return of Premium rider?
increasing term
When a fixed annuity owner pays a monthly annuity premium to the insurance company, where is this money placed?
insurance company's general account
What are the 3 Fraud acts knowingly committed by an agent/insurer and how much may they be penalized with?
* $500 fine for FIRST offense, $1000 for SECOND & so on offenses for: 1. making false ads regarding financial condition of insurer for payment of losses/claims 2. Ad's that show financial standing of insurer by including statements by the department *ATLEAST $10 but NO MORE than $1000 penalty for: 3. failing to provide signed receipt on behalf of life insurer for any disbursement over $100
What are the 4 advertisement rules for viatical settlements?
-Ads must be truthful and avoid deceptive statements -System of control over content and method of showing ads must be done on annual basis at least. -Ad's that list SPEED at which vitiation occurs must disclose average TIME FRAME -Ad's that show $ AMOUNT AVAILABLE to people must disclose AVERAGE PURCHASE PRICE as % of face value obtained by other viators in last 6 months.
Replacement rules do not apply to transactions involving who?
-Credit life insurance OR Group life insurance/ annuities
In traditional IRA's, the owner MUST start receiving what from the IRA? And at what age?
-distributions, AT LEAST the required minimum distribution amount (RMD) -Age 72
What are the prohibitions of practing/entering into a V.S. contract as a viatical settlement provider/broker?
-entering into a settlement contract prior to application of issuance of life insurance policy -promoting purchase of life insurance policy for the purpose of selling policy -entering into a settlement contract w/in 5 years of life insurance policy being issued
How long do you have to be licensed to be a viatical settlement provider? How long does the insured/policy have to be in place to get a viatical settlement?
1. 5 years 2. 5 years
Gramm-Leach-Bliley Act requires 2 DISCLOSURES to a customer that has ongoing financial relationship w/ company when...
1. Customer relationship is established/policy is purchased 2. BEFORE disclosing protected information
What 2 actions are NOT considered to be illegal inducements?
1. Giving promotional/advertising items/meals with a market value of $50 or LESS/ calendar year, AS LONG AS it is NOT tied to a purchase of insurance policy 2. Offering contests, raffles & drawings open to the PUBLIC, as long as participants are NOT given the CHANCE to WIN a FREE PRIZE. OR participation is NOT tied to sale/solication of insurance product. AND NO purchase/renewal of insurance is required to ENTER or WIN a prize.
What are the 3 exceptions/ reasons to disclose nonpublic personal info to nonaffiliated 3rd party per the Gramm-Leach-Bliley Act?
1. Insurance company CLEARLY discloses to consumer IN WRITING that info may be disclosed to 3rd party 2. If the consumer is given opportunity, b4 information is disclosed, to DIRECT that information NOT be disclosed to 3rd party 3. If consumer is given EXPLANATION on HOW consumer can EXERCISE a nondisclosure option .
All of the following are true regarding a decreasing term policy EXCEPT
1. The payable premium amount steadily declines throughout the duration of the contract.
Which is true about a spouse term rider? (Choose from the following options) 1. The rider is usually level term insurance. 2. Coverage is allowed for an unlimited time. 3. The rider is decreasing term insurance. 4. Coverage is allowed up to age 75.
1. The rider is usually level term insurance.
When would life insurance policy proceeds be included in the insured's taxable estate?
1. When there are any incidents of insured's ownership at the time of death
Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE? 1. Withdrawals are not taxable. 2. Distributions before age 59 1/2 incur a 10% penalty on policy gains. 3. Policy loans are taxable distributions.4 . Accumulations are tax deferred.
1. w/draws r not taxable
An insurance agent licensed in another state may apply for a prelicensing education exemption within how many days of establishing a principle place of business in Ohio?
180 days
An insured purchased a life insurance policy on his life naming his wife as primary beneficiary, and his daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?
2. If the primary beneficiary predeceased the insured
Which of the following statements regarding HIV testing for life insurance purposes is NOT true? (Choose from the following options) 1. The testing practices must meet the criteria of the U.S. Department of Health and Human Services. 2. HIV testing is regulated at the state level. 3. Insurers are barred from requesting HIV testing. 4. Positive test results will be forwarded to the state's Department of Health if a physician is not selected by the applicant.
3. Insurers are barred from requesting HIV testing.
An insured states her age as 40 on the application. When she dies, the insurer discovers that she was actually only 37 at the time of application. What will the insurance company do?
3. Pay a decreased death benefit
Which of the following is true regarding a waiver of a surrender charge on an annuity contract?
3. The charge may be waived if the annuitant is confined to a long-term care facility for at least 30 days.
According to the Entire Contract provision, a policy must contain
4. A copy of the original application for insurance.
If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered
4. An unfair trade practice.
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?
4. Attending Physician Statement
Which of the following has the authority to issue a cease and desist order?
4. Federal Insurance Regulation Board
If a life insurance policy increases significantly in face amount (death benefit) when the insured reaches a specified age, what type of policy is this?
4. Jumping juvenile policy
All of the following are TRUE statements regarding the accumulation at interest option EXCEPT 1. The annual dividend is retained by the company. 2. The interest is credited at a rate specified by the policy. 3. The policyholder has the right to withdraw the accumulations at any time. 4. The interest is not taxable since it remains inside the insurance policy.
4. The interest is not taxable since it remains inside the insurance policy.
If a cybersecurity event has occurred, licensees must maintain records of the incident for no less than
5 years
Insurers may only use a buyer's guide that has been approved by the NAIC no longer than what time period before use
6 months
In forming an insurance contract, when does acceptance usually occur? If a settlement option is not chosen by the policyowner or the beneficiary, which option will be used? lump sum payment
B. When an insurer approves a prepaid application
Grounds for suspension and revocation of Viatical Settlement License
ME PUCC 1. Material misrepresentation on application 2.Evidence of untrustworthiness/incompetence 2. Prior convictions of fraud/dishonest practices 5. Unreasonable payments to viators 3. Current/previous administrative action in other state 6. Conviction/guilt pleas to felonies/misdemeanor's involving fraud, morals, dishonesty or breach of contract
Insurance is the transfer of
Risk
60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true?
The amount of the distribution is reduced by the amount of a 20% withholding tax.
Under an extended term nonforfeiture option, the policy cash value is converted to
The same face amount as in the whole life policy
If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered
a settlement option
An applicant for insurance misstates her age at the time her life insurance application is taken. This misstatement may result in
adjustment in the death benefit
Regarding the free-look provision, the insurance company must
allow the policy owner to return the policy for a full refund of premium
Which of the following types of agent authority is also called "perceived authority"?
apparent
In a group life insurance policy, the employer may select all of the following EXCEPT
beneficiary
When a policyowner designates a group of individuals as the beneficiary of a life insurance death benefit without specifically naming the individuals, this is called
class designation
If an insured changes his payment plan from monthly to annually, what happens to the total premium?
decreases
Two individuals are in the same risk and age class; yet, they are charged different rates for their insurance policies due to an insignificant factor. What is this called?
discrimination
Which of the following is NOT true regarding Equity Indexed Annuities?
earn lower interest rates than fixed annuities
The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the
incontestability clause
An insured owns a term policy with a guaranteed renewable option. When the end of the policy draws near, the insured answers medical questions in order to prove insurability and qualifies for a discounted premium rate. Which option best describes this scenario?
re entry
Which is true about a spouse term rider?
rider is usually level term insurance
What part of the Internal Revenue Code allows an owner of a life insurance policy or annuity to exchange or replace their current contract with another contract without creating adverse tax consequences?
section 1035 policy exchange
In insurance, an offer is usually made when
the application is submitted
What is the tax consequence of amounts received from a Traditional IRA after the money was left in the tax-deferred account by the beneficiary?
4. Income tax on distributions and no penalty.
If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may
4. Require evidence of insurability.
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?
Guaranteed surrender value
In traditional IRA's, who's allowed to make tax deductible contributions to the account?
Individuals w/ earned income, regardless of age
All of the following are beneficiary designations EXCEPT
specified. ones that are: Contingent.2. Primary.Tertiary.
Gramm-Leach-Bliley Act
stipulates that in general, an insurance company may not disclose nonpublic personal information to a nonaffiliated third party
A viatical settlement is arranged between a viatical company and a/an
terminally ill insured
Which of the following is NOT a characteristic of variable annuities?
they offer guaranteed stock performance
An insured with a life insurance policy is diagnosed with a terminal illness. Which of the following could be a suitable option for this insured?
viatical settlement
How must a replacing producer respond to an applicant wishing to replace existing life insurance?
3. The producer must provide the applicant with a Notice Regarding Replacement.
Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated?
3. Those who have been insured under the plan for at least 5 years
Under what circumstances may a life insurance agent deliver a policy that is dated up to 6 months before the application was taken?
3. To avoid an increase in premium rate for the insured
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?
3. Universal life
When an agent's appointment has been terminated, the insurer must notify the Director within how many days?
30 days
When an annuity is written, whose life expectancy is taken into account?
annuitant
Which of the following is an example of liquidity in a life insurance contract?
cash value available to beneficiary
To legally transact insurance in this state, an insurer must obtain which of the following?
certficate of authority
What do individuals use to transfer their risk of loss to a larger group?
insurance
What must happen when an individual policy or annuity has been personally delivered to the policyowner?
policy owner must sign a delivery receipt
Which is TRUE about the cash surrender nonforfeiture option?
3. Funds exceeding the premium paid are taxable as ordinary income.
Which of the following is usually true of a participating life insurance policy?
it pays dividends to policy owners
If a settlement option is not chosen by the policyowner or the beneficiary, which option will be used?
lump sum payment
When must insurable interest exist in a life insurance policy? 1. At the time of policy delivery 2. When there is a change of the beneficiary 3. At the time of loss 4. At the time of application
At the time of application
Which of the following statements about the reinstatement provision is true?
It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated.
Which of the following is NOT a goal of risk retention?
Retention results from three basic elements. To reduce expenses and improve cash flow to increase control of claim reserving settlements to fund losses that cannot be insured. Answer: To minimize the insured's level of liability in the event of loss
All of the following statements are true regarding installments for a fixed amount EXCEPT Value of the account and future earnings will determine the time period for the benefits This option pays a specific amount until the funds are exhausted The annuitant may select how big the payments will be The payments will stop when the annuitant dies.
The payments will stop when the annuitant dies.
An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy?
mutual
Traditional IRA contributions are tax deductible based on which of the following?
owner's income
Which of the following riders would NOT cause the Death Benefit to increase?
payor benefit rider
If someone wants to buy a life insurance policy that will provide lifetime protection against premature death, what type of life insurance policy should that person buy?
permeant
Which of the following individuals must have insurable interest in the insured?
policy owner
What is the maximum civil penalty for violating the Director's cease and desist order?
$5k
Which of the following best describes annually renewable term insurance? (Choose from the following options) 1. It is level term insurance. 2. It requires proof of insurability at each renewal. 3. Neither the premium nor the death benefit is affected by the insured's age. 4. It provides an annually increasing death benefit.
1.
A rider attached to a life insurance policy that provides coverage on the insured's family members is called the
3. Other-insured rider.
All of the following are true of an annuity owner EXCEPT
3. The owner must be the party to receive benefits.
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?
any form of life insurance
If the annuitant dies during the accumulation period, who will receive the annuity benefits?
beneficiary
the incontestability period and how long is it?
clause that prevents insurer from denying a claim due to statements in the application AFTER policy has been in force for.. 3 YEARS
When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?
consideration
According to the entire contract provision, what document must be made part of the insurance policy?
copy of original contract
What happens when a policy is surrendered for its cash value?
coverage ends and policy can NOT be reinstated
The type of insurance sold to a debtor and designed to pay the amount due on a loan if the debtor dies before the loan is repaid is called
credit life
