life insurance exam part 2
What type of premium do both Universal Life and Variable Universal Life policies have? A Flexible B Level fixed C Decreasing D Increasing
A Flexible
Who bears all of the investment risk in a fixed annuity? A The insurance company B The owner C The beneficiary D The annuitant
A The insurance company
The death protection component of Universal Life Insurance is always A Adjustable Life B Decreasing Term C Annually Renewable Term D Whole Life
C Annually Renewable Term
What is the advantage of reinstating a policy instead of applying for a new one? A The face amount can be increased. B The cash values have gained interest while the policy was lapsed. C The original age is used for premium determination. D Proof of insurability is not required.
C The original age is used for premium determination.
Before he died, an annuitant had received $12,500 in monthly benefits from his $25,000 straight life annuity. He was also the insured under a $50,000 paid-up whole life policy that named his wife as primary beneficiary. Considering both contracts, how much will the annuitant's spouse receive in benefits? A $50,000 B $62,500 C $75,000 D Nothing
A $50,000
If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply? A 5 days B 7 days C 10 days D 3 days
A 5 days
Which of the following is a short-term annuity that limits the amounts paid to a specific fixed period or until a specific fixed amount is liquidated? A Annuity certain B Fixed annuity C Refund life D Variable annuity
A Annuity certain
The term "fixed" in a fixed annuity refers to all of the following EXCEPT A Death benefit B Guaranteed rate of interest C Equal annuity payments D Amount and length of payments
A Death benefit
The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been in force for at least how many years? A 1 year B 2 years C 5 years D 7 years
B 2 years
In an annuity, the accumulated money is converted into a stream of income during which time period? A Conversion period B Annuitization period C Payment period D Amortization period
B Annuitization period
If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a A Cost of living provision. B Nonforfeiture option. C Guaranteed insurability rider. D Paid-up additions option.
C Guaranteed insurability rider.
The death protection component of Universal Life Insurance is always A Whole Life B Adjustable Life C Decreasing Term D Annually Renewable Term
D Annually Renewable Term
Which of the following is TRUE about a class designation? A Beneficiaries must be part of the insured's immediate family. B It is not allowed. C It determines the succession of beneficiaries. D Beneficiaries are not identified by name.
D Beneficiaries are not identified by name.
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 Jumping Juvenile B Juvenile Premium Provision C Waiver of Premium D Payor Benefit
D Payor Benefit
What provision in an insurance policy extends coverage beyond the premium due date? A Grace period B Free look C Automatic premium loan D Waiver of premium
A Grace period
If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a A Guaranteed insurability rider. B Paid-up additions option. C Cost of living provision. D Nonforfeiture option.
A Guaranteed insurability rider.
What is the benefit of choosing extended term as a nonforfeiture option? A It can be converted to a fixed annuity. B It has the highest amount of insurance protection. C It matures at age 100. D It allows for coverage to continue beyond maturity date.
B It has the highest amount of insurance protection.
Which of the following riders would NOT cause the Death Benefit to increase? A Accidental Death Rider B Payor Benefit Rider C Guaranteed Insurability Rider D Cost of Living Rider
B Payor Benefit Rider
What is another name for interest-sensitive whole life insurance? A Term life B Adjustable life C Current assumption life D Variable life
C Current assumption life
Which of the following riders would NOT cause the Death Benefit to increase? A Cost of Living Rider B Accidental Death Rider C Payor Benefit Rider D Guaranteed Insurability Rider
C Payor Benefit Rider
Which of the following is NOT true regarding the Life with Guaranteed Minimum annuity settlement option? A It is a life contingency option. B The beneficiary receives the remainder of the principal amount upon the annuitant's death. C Payments can be made in installments and as a single cash refund. D It does not guarantee that the entire principal amount will be paid out.
D It does not guarantee that the entire principal amount will be paid out.
Life income joint and survivor settlement option guarantees A Income for 2 or more recipients until they die. B Payment of interest on death proceeds. C Payout of the entire death benefit. D Equal payments to all recipients.
A Income for 2 or more recipients until they die.
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit? A Universal Life - Option A B Universal Life - Option B C Equity Indexed Universal Life D Variable Universal Life
A Universal Life - Option A
In forming an insurance contract, when does acceptance usually occur? A When an insurer's underwriter approves coverage B When an insurer delivers the policy C When an insurer receives an application D When an insured submits an application
A When an insurer's underwriter approves coverage
Your client is planning to retire. She has accumulated $100,000 in a retirement annuity, and now wants to select the benefit option that will pay the largest monthly amount for as long as she lives. As her agent, you should recommend A Joint and survivor. B Straight life. C Life income with period certain. D Installment refund.
B Straight life.
Which of the following products requires a securities license? A Equity Indexed annuity B Deferred annuity C Variable annuity D Fixed annuity
C Variable annuity
An insured receives an annual life insurance dividend check. What term best describes this arrangement? A Accumulation at Interest B Cash option C Reduction of Premium D Annual Dividend Provision
B Cash option
Why is an equity indexed annuity considered to be a fixed annuity? A It is not tied to an index like the S&P 500. B It has a guaranteed minimum interest rate. C It has modest investment potential. D It has a fixed rate of return.
B It has a guaranteed minimum interest rate.
All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT A Upon conversion, the premium for the permanent policy will be based upon attained age. B Upon conversion, the death benefit of the permanent policy will be reduced by 50%. C Evidence of insurability is not required. D Most term policies contain a convertibility option.
B Upon conversion, the death benefit of the permanent policy will be reduced by 50%.
If a settlement option is not chosen by the policyowner or the beneficiary, which option will be used? A Fixed amount B Lump sum C Life income D Fixed period
C Life income
Which of the following explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy? A The Consideration Clause B Assignment Rights C Owner's Rights D The Entire Contract Provision
C Owner's Rights
Why is an equity indexed annuity considered to be a fixed annuity? A It has modest investment potential. B It has a fixed rate of return. C It is not tied to an index like the S&P 500. D It has a guaranteed minimum interest rate.
D It has a guaranteed minimum interest rate.
Which of the following is NOT true regarding the annuitant? A The annuitant's life expectancy is taken into consideration for the annuity. B The annuitant receives the annuity benefits. C The annuitant must be a natural person. D The annuitant cannot be the same person as the annuity owner.
D The annuitant cannot be the same person as the annuity owner.
Stranger-originated life insurance policies are in direct opposition to the principle of A Indemnity. B Insurable interest. C Law of large numbers. D Good faith.
B Insurable interest.
The Medical Information Bureau (MIB) was created to protect A Medical examiners that perform insurance physical examinations. B Insurance companies from adverse selection by high risk persons. C Insurance departments from lawsuits by policyowners. D Insureds from unreasonable underwriting requirements by the insurance companies.
B Insurance companies from adverse selection by high risk persons.
Under a straight life annuity, if the annuitant dies before the principal amount is paid out, the beneficiary will receive A Guaranteed minimum benefit. B The amount paid into the annuity. C The remainder of the principal. D Nothing; the payments will cease.
D Nothing; the payments will cease.
Which of the following is TRUE about the 10-day free-look period in a Life Insurance policy? A It begins when the policy is delivered. B It begins when the application is signed. C It applies only to term life insurance policies. D It is optional on all life insurance policies.
A It begins when the policy is delivered.
What is the purpose of a conditional receipt? A It is intended to provide coverage on a date prior to the policy issue. B It guarantees that a policy will be issued in the amount applied for. C It serves as proof that the applicant has been determined insurable. D It is given only to applicants who fully prepay the premium.
A It is intended to provide coverage on a date prior to the policy issue.
When a reduced paid-up nonforfeiture option is chosen, what happens to the face amount of the policy? A It is reduced to the amount of what the cash value would buy as a single premium. B It is increased when extra premiums are paid. C It decreases over the term of the policy. D It remains the same as the original policy, regardless of any differences in value.
A It is reduced to the amount of what the cash value would buy as a single premium.
Which of the following is NOT true regarding an annuity certain? A Benefits stop at the annuitant's death. B It will pay until a fixed amount is liquidated. C There are no life contingencies. D It is a short-term annuity.
A Benefits stop at the annuitant's death.
An insured and his wife are both involved in a head-on collision. The husband dies instantly, and the wife dies 15 days later. The company pays the death benefit to the estate of the insured. This indicates that the life insurance policy had what provision? A Common Disaster B Accidental Death C Survivor Life D Second-to-Die
A Common Disaster
When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount? A The same as the original policy minus the cash value B Equal to the original policy for as long as the cash values will purchase. C In lesser amounts for the remaining policy term of age 100. D Equal to the cash value surrendered from the policy
B Equal to the original policy for as long as the cash values will purchase.
Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid A Until the policyowner's age 100, when the policy matures. B For 20 years or until death, whichever occurs first. C Until the policyowner reaches age 65. D For at least 20 years.
B For 20 years or until death, whichever occurs first.
Fixed annuities provide all of the following EXCEPT A Future income payments. B Hedge against inflation. C Equal monthly payments for life. D Minimum guaranteed rate of interest.
B Hedge against inflation.
Which two terms are associated directly with the premium? A Renewable or convertible B Level or flexible C Fixed or variable D Term or permanent
B Level or flexible
Which of the following is NOT true regarding the accumulation period of an annuity? A It would not occur in a deferred annuity. B It is the period during which the annuity payments earn interest. C It is the period over which the owner makes payments into an annuity. D It is also known as the pay-in period.
A It would not occur in a deferred annuity.
Under a pure life annuity, an income is payable by the company A Only for the life of the annuitant. B Until the principal and interest are exhausted. C For a guaranteed period of time, whether or not the annuitant survives to the end of that period. D For as long as either the annuitant or a named beneficiary is alive.
A Only for the life of the annuitant.
A rider attached to a life insurance policy that provides coverage on the insured's family members is called the A Other-insured rider. B Change of insured rider. C Juvenile rider. D Payor rider.
A Other-insured rider.
An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosen is called A Paid-up additions. B One-year term purchase. C Accumulation at interest. D Reduction of premiums.
A Paid-up additions.
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
The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this? A Reduction of premium B Paid-up addition C Accumulation at interest D Cash option
A Reduction of premium
Under the Fair Credit Reporting Act, if a consumer challenges the accuracy of the information contained in a consumer or investigative report, the reporting agency must A Respond to the consumer's complaint. B Defend the report if the agency feels it is accurate. C Change the report. D Send an actual certified copy of the entire report to the consumer.
A Respond to the consumer's complaint.
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 Universal life B Adjustable life C Term life D Limited pay
A Universal life
In a survivorship life policy, when does the insurer pay the death benefit? A Upon the last death B Upon the first death C Half at the first death, and half at the second death D If the insured survives to age 100
A Upon the last death
An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy? A. Nonforfeiture options B Guaranteed insurability option C Dividend options D Guaranteed renewable option
B Guaranteed insurability option
Under which of the following annuity options does the annuitant select the time period for the benefits, and the insurer determines how much each payment will be? A Cash refund B Installments for a fixed period C Installments for a fixed amount D Installment refund
B Installments for a fixed period
The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose? A Fixed amount option B Interest only option C Life income with period certain D Joint and survivor
B Interest only option
Which of the following is NOT true regarding the Life with Guaranteed Minimum annuity settlement option? A Payments can be made in installments and as a single cash refund. B It does not guarantee that the entire principal amount will be paid out. C It is a life contingency option. D The beneficiary receives the remainder of the principal amount upon the annuitant's death.
B It does not guarantee that the entire principal amount will be paid out.
All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT A The insurer determines the amount for each payment. B It is a life contingency option. C It will pay the benefit only for a designated period of time. D The payments are not guaranteed for life.
B It is a life contingency option.
What is the purpose of a conditional receipt? A It is given only to applicants who fully prepay the premium. B It is intended to provide coverage on a date prior to the policy issue. C It guarantees that a policy will be issued in the amount applied for. D It serves as proof that the applicant has been determined insurable.
B It is intended to provide coverage on a date prior to the policy issue.
A couple receives a set amount of income from their annuity. When the wife dies, the husband no longer receives annuity payments. What type of annuity did the couple buy? A Joint limited annuity B Joint life C Joint and survivor D Life with period certain
B Joint life
Which of the following settlement options in life insurance is known as straight life? A Fixed amount B Life income C Single life D Life with period certain
B Life income
What is a definition of a unilateral contract? A If one party makes a condition, the other party can counteroffer. B One-sided: only one party makes an enforceable promise. C Two or more parties go into a contract understanding there may be an unequal exchange of value. D One author: the company wrote the contract; the insured must accept it as written.
B One-sided: only one party makes an enforceable promise.
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? A Dividend Accumulation option B Paid-up option C Accumulation at Interest D Paid-up additions
B Paid-up option
Which of the following information will be stated in the consideration clause of a life insurance policy? A The conditions for insurability B The amount of premium payment C The parties to the contract D The time period allowed for the payment of premium
B The amount of premium payment
Which of the following statements is TRUE concerning irrevocable beneficiaries? A They may be changed only on the anniversary date of the policy. B They can be changed only with the written consent of that beneficiary. C They may be changed at any time. D They can never be changed.
B They can be changed only with the written consent of that beneficiary.
What is the purpose of a disclosure statement in life insurance policies? A To protect agents and insurers against lawsuits B To explain features and benefits of a proposed policy to the consumer C To obtain important underwriting information from the applicant D To help consumers compare policy prices
B To explain features and benefits of a proposed policy to the consumer
The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive? A $0 B $50,000 (50% of the policy value) C $100,000 D $300,000 (triple the amount of policy value)
C $100,000
Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner? A Paid-up options B Extended term C Cash surrender D Reduced paid-up
C Cash surrender
Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as A Aleatory contracts. B Binding contracts. C Contracts of adhesion. D Unilateral contracts.
C Contracts of adhesion.
According to the entire contract provision, what document must be made part of the insurance policy? A Agent's report B Outline of coverage C Copy of the original application D Buyer's Guide
C Copy of the original application
A rider that may be attached to a life insurance policy that will adjust the face amount based upon a specific index, such as the Consumer Price Index, is called A Living need rider. B Payor rider. C Cost of living rider. D Accelerated benefit rider.
C Cost of living rider.
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.
An applicant is denied insurance because of information found on a consumer report. Which of the following requires that the insurance company supply the applicant with the name and address of the consumer reporting company? A Conditional receipt B Disclosure rule C Fair Credit Reporting Act D Consumer Privacy Act
C Fair Credit Reporting Act
What type of insurance would be used for a Return of Premium rider? A Decreasing Term B Annually Renewable Term C Increasing Term D Level Term
C Increasing Term
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? A Paid-up additions B Dividend Accumulation option C Paid-up option D Accumulation at Interest
C Paid-up option
Nonforfeiture values guarantee which of the following for the policyowner? A That the death benefit will be paid in a lump sum B That the policy premiums will never increase C That the cash value will not be lost D That the dividends will be paid annually
C That the cash value will not be lost
All of the following statements about equity index annuities are correct EXCEPT A The interest rate is tied to an index such as the Standard & Poor's 500. B They invest on a more aggressive basis aiming for higher returns. C The annuitant receives a fixed amount of return. D They have a guaranteed minimum interest rate.
C The annuitant receives a fixed amount of return.
Which of the following determines the cash value of a variable life policy? A The policy's guarantees. B The premium mode C The performance of the policy portfolio D The company's general account
C The performance of the policy portfolio
Under an extended term nonforfeiture option, the policy cash value is converted to A A lower face amount than the whole life policy. B A higher face amount than the whole life policy. C The same face amount as in the whole life policy. D The face amount equal to the cash value.
C The same face amount as in the whole life policy.
An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries? A The beneficiary will receive 2/3 of the total benefit, with the final 1/3 payable when the first beneficiary dies. B One of the beneficiaries will receive 1/3 and the other 2/3 of the proceeds when the insured dies. C The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive. D The beneficiary will receive 2/3 of the lump sum up front, and the remaining 1/3 will be paid over time.
C The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.
All of the following are true regarding the guaranteed insurability rider EXCEPT A The insured may purchase additional insurance up to the amount specified in the base policy. B It allows the insured to purchase additional amounts of insurance without proving insurability only at specified dates or events. C This rider is available to all insureds with no additional premium. D The insured may purchase additional coverage at the attained age.
C This rider is available to all insureds with no additional premium.
The paid-up addition option uses the dividend A To reduce the next year's premium. B To accumulate additional savings for retirement. C To purchase a smaller amount of the same type of insurance as the original policy. D To purchase a one-year term insurance in the amount of the cash value.
C To purchase a smaller amount of the same type of insurance as the original policy.
Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT A Consideration. B Legal purpose. C Offer and acceptance. D Conditions.
D Conditions.
A long stretch of national economic hardship causes a 7% rate of inflation. A policyowner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change? A Value Adjustment Rider B Return of Premium Rider C Inflation Rider D Cost of Living Rider
D Cost of Living Rider
Which of the following is NOT true regarding the accumulation period of an annuity? A It is the period during which the annuity payments earn interest. B It is the period over which the owner makes payments into an annuity. C It is also known as the pay-in period. D It would not occur in a deferred annuity.
D It would not occur in a deferred annuity.
Which of the following riders would NOT cause the Death Benefit to increase? A Guaranteed Insurability Rider B Cost of Living Rider C Accidental Death Rider D Payor Benefit Rider
D Payor Benefit Rider
All of the following are true regarding insurance policy loans EXCEPT A The amount of the outstanding loan and interest will be deducted from the policy proceeds when the insured dies. B The policy will terminate if the loan plus interest equals or exceeds the cash value of the policy. C Policyowners can borrow up to the full amount of their whole life policy's cash value. D Policy loans can be made on policies that do not accumulate cash value.
D Policy loans can be made on policies that do not accumulate cash value.
An insured committed suicide one year after his life insurance policy was issued. The insurer will A Pay the policy's cash value. B Pay the full death benefit to the beneficiary. C Pay nothing. D Refund the premiums paid.
D Refund the premiums paid.
Which of the following best describes what the annuity period is? A The period of time from the accumulation period to the annuitization period B The period of time during which money is accumulated in an annuity C The period of time from the effective date of the contract to the date of its termination D The period of time during which accumulated money is converted into income payments
D The period of time during which accumulated money is converted into income payments
Which of the following is NOT true regarding Equity Indexed Annuities? A The insurance company keeps a percentage of the returns. B They have guaranteed minimum interest rates. C They are less risky than variable annuities. D They earn lower interest rates than fixed annuities.
D They earn lower interest rates than fixed annuities.
What is the purpose of a fixed-period settlement option? A To settle the insurance company's liability B To provide a guaranteed income for life C To provide a guaranteed amount of money each month D To provide a guaranteed income for a certain amount of time
D To provide a guaranteed income for a certain amount of time
