Life Insurance Exam Question (Texas)
The death benefit in a Universal Life policy is always annually renewable term...
True
A spouse receives $5,000 a month until the principal and interest on her husband's life insurance policy have been paid out. Which settlement options did this beneficiary choose?
Fixed amount
Which of the following is NOT a requirement of a qualified plan?
It must be temporary. (a qualified plan is permanent)
The number of credits required to obtain a fully insured status to receives social security benefits is
40
Upon the insured's death, the beneficiary of a whole life policy will receive the face amount and the cash value
False
Which of the following is true regarding a joint life policy ?
Premium is based on the average age of the insureds
Insurable interest must exist at the time of
application
Representations are statements made by the applicant that are
Considered true to the best of the applicant's knowledge
Which of the following includes information regarding a person's credit, character, reputation, and habits?
Consumers report
The proceeds paid to the beneficiary of a life insurance policy are called the
Death benefits
An individual inherited a large sum of money at age 40 and wanted to use it to provide a guaranteed income after his retirement at age 60. Which of the following types of annuities would best meet this need?
Deferred
Which of the following is NOT a standard exclusion in life insurance policies?
Disability
In a group life polices, individual certificates are given to
Each insured person
Which of the following features allows an insurance policy to remain in force for a specific number of days beyond the premium due date?
Grace period provision
Which of the following statements is true regarding a universal life policy?
It is issued without a guaranteed interest rate
A substandard risk compared to a standard risk would pay
A higher premium
Which of the following is considered a field underwriter?
An agent
All of the following are nonforfeiture options in life insurance policies EXCEPT
Automatic premium loans
The person who is covered by the insurance policy is referred to as the
Insured
What is the requirement for a number of employees in a SIMPLE plan?
No more than 100
Decreasing term graph In the graphic below, what does line B represent? "---"
Premium
Term life insurance is referred to as
Temporary protection
What is the annuity accumulation period?
The pay in period
Which of the following insurance arrangement will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner?
Third- party ownership
As a field underwriter, an agent is responsible for helping the insurer prevent adverse selection.
True
If an insurer issues a policy with unanswered questions on the application, the insurer has given up the right to use the missing information in underwriting.
True
Insurance is the transfer of risk
True
Who is considered the field underwriter
agent
The 10 % early withdrawal penalty from an IRA can be waived for
catastrophic medical expenses
With a traditional whole life policy, the death benefit
remains constant overtime
If an agent fails to obtain an applicant's signature on the insurance application, the agent must
Return the application to the applicant for a signature.
What is the main responsibility of a company's underwriting unit?
Risk selection and classification( preferred, standard, substandard)
The advantage of qualified plans to employers is
Tax- deductible contributions
Whole life insurance only endows at age 100.
True
What type of receipt is given to the applicant who submits the application with the premium payment?
conditional
An insurer is required to obtain a signed disclosures authorization form when it intends to
obtain a consumer report (credit report)
An illustration used in the sale of a life insurance policy must include a label stating
"Life insurance illustration"
Anyone who violates the Insurance Code of Texas may be fined up to
$25,000.
How many hours of continuing education can be carried over from one licensing period to the next?
0 (All CE hours must be completed during the reporting period; licensees are not allowed to carry over excess hours to the next reporting period.)
The Commissioner of insurance issues a cease and desist order and immediately receives a request for the charges to be reviewed in a hearing. Within how many days must the hearing be held?
10 days
Which type of whole life policy would have the highest premium for a 25- year old applicant?
10 pay life
The tax penalty for withdrawals from a traditional IRA before age 59 1/2 is
10 percent
The insured is also the policyowners of a whole life policy. What age must the insured attain to receive the policy's face amount?
100
How many days does a viator have to rescind a viatical settlement after receiving the proceeds?
15 days
What is the minimum required number of continuing education credits in ethics every licensing period ?
2 hours
According to the limitations of lawsuit provision, how many years does a claimant have to take legal actions against the insurer?
2 years
Which of the following statements is NOT true concerning insurable interest as it applies to life insurance?
A debtor has an insurable interest in the life of a lender. (A lender has an insurable interest in the life of a debtor, but only to the extent of the debt. The debtor does not have an insurable interest in the life of the lender.)
Which of the following would be required to be licensed as an insurance producer?
A salaried employee who advertises and solicits insurance (A person does not require an insurance producer license if he or she only advertises without intent to solicit insurance. However, once there is solicitation, a license is required.)
The Medical Information Bureau is
A source of medical information to alert insurers to adverse medical history
In an individual life insurance policy, when must the nonforfeiture benefits begin?
After 3 policy years
When transacting business in this state an insurer formed under the laws of another country is known as a/an
Alien insurer.
The legal transfer of all or part of a policyowner's right, title or interest is called an
Assignment
Premiums in renewable term polices are based on the insured's
Attained age
When the guaranteed insurability rider is exercised, the additional coverage is based on the insured's
Attained age
Who receives the death benefit in a life insurance policy?
Beneficiary
Betty is the only beneficiary named on her husband Bob's policy, which as a common Disaster provision. They are in a car accident, and Bob die instantly. Betty lives for 29 days. Who will receive the death benefits?
Bob's estate
What does "liquidity" refer to in a life insurance policy?
Cash values can be borrowed at any time.
A banker is ready to close on a customer's loan. The bank is prepared to offer the loan but only if the customer purchases a life insurance policy from the bank in the amount of the loan. This is an example of
Coercion. (This is an example of the illegal practice of coercion.)
Information collected from employment records, credit report or other sources that includes written or oral information concerning credit, character, reputation or habits is called an
Consumer report
A key- person insurance policy benefit will pay for which of the following?
Cost of training a replacement
An individual has just been diagnosed with a quickly-spreading, fatal form of cancer; his oncologist predicts that he will live for 5 months. He applies for individual life insurance. What risk classification will he most likely receive?
Declined
The owner of a small restaurant submits a claim to his insurer after a loss due to fire. The insurer's investigation finds a police report that shows that a fire may have been of suspicious origin. The insurer can do which of the following?
Delay an acceptance or rejection decision
The federal law that permits an applicant for insurance to question the validity and source of any credit information is called
Fair Credit Reporting act
If Tom's policy allows him to make periodic additions to the face amount at standard rates, without proving insurability, his policy includes a
Guaranteed insurability option.
A father purchases a life insurance policy on his teenage daughter and adds the Payor Benefit rider. In which of the following scenarios will the rider waive the payment of premium?
If the father is disabled for more than 6 months
Which of the following provisions prevents an insurers from denying a claim due to statements made on a life insurance application after the policy has been in force for a period of time?
Incontestability (2 years)
What would be an advantage to naming a contingent (or secondary) beneficiary in a life insurance policy?
It determines who receives policy benefits if the primary beneficiary is deceased. (Naming a secondary beneficiary (also referred to as contingent beneficiary) ensures that there is a beneficiary to receive policy proceeds if the primary beneficiary dies before the insured. If there is no secondary beneficiary, the policy benefits will go to the insured's estate.)
An individual receives a temporary life insurance agent's license on January 1, 2010. When will the licensee be eligible to receive another temporary license?
July 1, 2010
Which entity protects the policyowners and beneficiaries if an insurer becomes insolvent?
Life and health Guaranty Association
The plan sponsor in a group life insurance receives a
Master Contract
The MIB is a nonprofit trade association that maintains
Medical information on applicants for life and health insurance
What is the term for how frequently a policyowner is required to pay the policy premium?
Mode
The life income settlement options protects the beneficiary against
Outliving the money
What is the major difference between a Stock Company and a Mutual Company?
Ownership
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?
Paid-up option
The insured died four months after a 100,000 life insurance policy was issued and delivered. At the time of the claim, the company noticed the original application was missing some key information. What will the company do?
Pay the death claim because the insurer waived the right to obtain the missing information
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?
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.)
To reinstate the full death benefit of a life policy that has been kept in force by the automatic premium loan provision, the policyowner must
Repay the loan plus interest, show proof of insurability
A beneficiary that may be changed at any time by the policyowner is known as
Revocable
What should a producer do if information on an application for insurance is missing or needs to be corrected?
Set up an appointment with the applicant to either complete a new application or correct the error and have the applicant initial the change
A woman has a life policy in force for $300,000. She is terminally ill. She wants to get an "advance" from her death benefit to help pay her mounting medical bills. She met some people who said they could advance her $100,000 if she would sign ownership over to them.
She probably met with a Viatical Settlement Company.
What type of annuity does the image below represent ? The premium paid in lump sum in 2014 and then the payment start in 2017.
Single premium deferred annuity
A person of average physical condition and lifestyles would receive which underwriting classification?
Standard
The cash value in an Equity indexed life policy is usually linked to which of the following?
Standard and Poor's 500 (S&P 500)
Which of the following would NOT sign an application for life insurance policy?
The beneficiary
A universal life contract expires when
The cash value account become too small to pay the cost of the insurance.
All of the following apply to the waiver of premium rider except
There is not charge for this provision
A policy owned by someone other than the insured is known as
Third-party ownership
Nonforfeiture means the policyowners never loses the cash value in the policy
True
The entire contact consists of the policy, application and rider
True
The grace period provision protects against the unintentional lapsing of a policy
True
Which policy allows the policyowner to increase, decrease, or skip premium payments?
Universal life
What is the term for an insured who enters into a viatical settlement ?
Viator
When is the earliest a policy may go into effect?
When the application is signed and a check is given to the agent
If a producer accepts a completed application without the first premium, when does coverage become effective for the insured?
When the policy is delivered and the first permium is paid
Which of the following is not a nonforfeiture options of a whole life policy ?
accumulate at interest
What will an insurance company do if an applicant misstates her age on the application for insurance?
adjust the face amount
A life insurance producer may share commissions with
another life producer
What do employees receive under a group contract?
certificate of insurance
The receipt given to a life insurance applicant when the application is completed and the initial premium is received is called a(n)
conditional receipt
Credit life insurance is usually written as what type of policy?
decreasing term
An insurer who deliberately makes a malicious statement about another insurance company is guilty of an illegal trade practice called
defamation
Cash loans are available from level term life insurance policies
false
In life insurance policies, the policyowners and the insured have ownership rights.
false
Lump-sum death benefits are taxable to the beneficiary
false
Variable whole life policies have __premium
fixed
In an insurance transaction, which of the following does a licensed agent represent?
insurer
The medical information bureau (MIB) membership consists of
insurers
A beneficiary who has a vested interest in the proceeds of a life insurance policy is the
irrevocable beneficiary
When the business is the owner, benefits payor, and beneficiary of a life insurance policy, the is an example of an
key person policy
What does an annuity protect the contract owner against?
outliving his or her money
The intent of the replacement regulations in life insurance is to protect the
policyowner
A limited pay whole life policy limits
premium payments
What does the payor benefits rider protect?
premium payments for a juvenile policy
An agent who offers cash reward to a prospect for buying a policy is guilty of
rebating
Premiums for a variable life policy are deposited in the
separate account
The commissioner of insurance is responsible for all of the following actions EXCEPT
setting premium rates
In order for a producer to represent an insurance company, the producer must be appointed.
true
The purpose of purchasing life insurance is to create an immediate estate
true
Which of the following types of policies allows partial surrenders?
universal life
A 20 pay whole life policy means that insured is covered
until death or age 100
Which law protects consumers against the circulation of inaccurate or obsolete information
Fair Credit Reporting Act
A beneficiary must have a insurable interest in the insured
False
Whose life expectancy is taken into consideration in an annuity?
Annuitant
Which of the following terms refers to the transfer of some or all of the ownership rights of a life insurance policy from one individual to another?
Assignment
Decreasing term graph, the line A that "\"?
Death benefits
When the insured purchase a new home, he wanted to purchase a life insurance policy that would protect his family against losing it should he die before the mortgage was paid. Which of the following polices is best suitable for that need?
Decreasing term
If the agent feels that there could be misrepresentation on the part of the applicant for insurance, what must the agent do?
Inform the insurance company
Which type of life insurance policy generates immediate cash value?
Single premium
With personal life insurance, the lumps- sum death benefits is received by the beneficiary
Tax Free
The time period during which an annuitant contributes to an annuity is called
The accumulation period
Purchasing a surivorship life policy is less expensive than purchasing two individual policies.
True
What is insurance?
is a contract in which one party (the insurance company) agrees to idemnify (make whole) the insured party against loss, damage or liability arising from an unknown event.
A warranty is an
absolutely true statement
Representation are statements made by the applicant for insurance that are
True to the best of the applicant's knowledge.
Which of the following is true about the free-look period in a life insurance policy?
It commences when the policy is delivered
The renewable provision allows the policyowner to renew the coverage at the expiration date.
Without evidence of insurability
The primary source of underwriting information is the
application
A life insurance policy becomes incontestable after
2 years
Within how many days of requesting an Investigative Consumer Report must an insurer notify the consumer in writing that the report will be obtained?
3 days
How long does an employee have to convert a group policy to an individual policy without evidence of insurability?
31 days
How long is the grace period in group life polices issued in this state?
31 days
The typical time period to convert group coverage to an individual policy is
31 days
Which of the following retirement plans is a special tax favored plan for nonprofit, charitable, educational or religious groups?
403 (b) Tax- sheltered Annuity (TSA)
Agents whose license has been revoked will not be able to receive another license in Texas for at least
5 years
What percentage of continuing education hours must be in a classroom setting?
50 (At least 50 percent of all required continuing education hours must be completed in a classroom setting or a classroom equivalent setting approved by the department.)
At the age can a participant receive distribution from a qualified plan without incurring a 10% penalty?
59 1/2
A temporary license is normally valid for
90 days
Variable Universal life insurance offers a policyowner which of the following features?
A face amount that must stay level
Which of the following is NOT a possible penalty for a violation of the Insurance Code?
A fine up to $100,000 (In addition to the suspension or revocation of a license, the Commissioner may impose any of all of the following penalties: issue a cease and desist order; order the payment of an administrative penalty; and order the licensee to make restitution. The penalty for a violation may not exceed $25,000.)
A permanent and total transfer of policy ownership right is called
Absolute assignment
Which rider allows the terminally ill insured to have access to some of the insurance proceeds while still living?
Accelerated Death Benefit
If a misstatement of age is discovered during the processing of a life insurance claim, what will the insurance company do?
Adjust the death benefits based on the premium that were paid.
An insured in a group policy has misstated his age on the insurance application. As a result, the insurer will most likely
Adjust the premium
Which of the following is the beneficiary in credit life insurance?
Creditor
A producer's obligation to handle the insured's funds in a trust capacity is called an
Fiduciary responsibility
A life settlement options that pays out the death benefits incrementally, in a specified amount until all of the proceeds are exhausted is called.
Fixed amount installment
An insurance company licensed to conduct business in states other than the one in which it is incorporated is a/an
Foreign company
What provisions in a life insurance policy extends coverage beyond the premium due date?
Grace period (30 days)
A life insurance death benefit paid in a lump sum to a beneficiary is
Not subject to any taxes
All of the following would be considered a insurance transaction EXPECT
Obtaining an insurance license.
Whole life insurance is referred to as
Permanent protection
Which of the following documents describes specific information about policy provisions and benefits?
Policy Summary
All of the following are true regarding insurance policy loans except
Policy loans can be made on polices that do not accumulate cash value.
All of the following are true regarding insurance policy loans EXCEPT
Policy loans can be made on policies that do not accumulate cash value.
what increase every year in an annually renewable term insurance policy?
Premium
children's riders attached to whole life policies are issued as what type of insurance?
Term life
All of the following statements about sources of underwriting are true EXCEPT
The contents of an inspection report cannot be disclosed to the applicant.
At the age 25, an individual purchased a decreasing term policy. what does that say about the coverage and the premium?
The coverage decreases but the premium stays the same.
If the insured's death occurs during the grace period, the beneficiary receives
The face amount minus any overdue premiums
An agent receives an Emergency Cease and Desist Order for chronically misrepresenting his insurance policies. The agent knows that he did not commit the violations stated in the Emergency Cease and Desist Order. He wants to contest the charges in a court hearing. Which of the following is true?
The hearing must be held within 10 days of receiving a request, unless both parties agree to a later date.
A printer has hired an advertising agency to design and edited advertisement brochures for an insurance company. Once the brochures are printed, who is responsible for the advertisement and their content?
The insurance company
Who bears all of the investment risk in a fixed annuity?
The insurance company
Which statement is INCORRECT concerning policy dividends?
The insurance company may guarantee dividends
An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-year term?
The insured may renew the policy for another 10 years, but at a higher premium rate.
If an applicant for insurance is submitted without premium, coverage begins when
The policy is delivered and the premium is paid
Limited pay Whole life line A stop "----'
The policy is paid up
An individual applies for a life policy. Two years ago he suffered a head injury from an accident, so he cannot remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history 1 year later. What will probably happen?
The policy will not be affected.
An unfair practice of twisting means misrepresenting a policy to persuade the policyholder to lapse or replace the policy even though it's not in the owner's best interest.
True
Assignment is a permanent or temporary change of policy ownership
True
Failing to complete continuing education in a timely manner may result in the producer's license being terminated.
True
An insured receives a monthly summary of his life insurance policy. The cash value this month is significantly lower than it was last month. What type of policy is it?
Variable
Which is a disability rider in a life insurance policy?
Waiver of premium
Because of an injury, an insured has been unable to work for 7 months. He wasn't able to pay his life insurance policy premium, yet the policy remained in force. The policy includes
Wavier of premium rider
What type of policies offers a loan options to the policyowner?
Whole life
If a claimant is to bring a recovery action against an insurance company for a loss claimed under a policy, the action must be brought
Within 2 years.
Which of the following person is required to hold a producer license?
a nonresident agent who negotiates insurance contracts
An insurance company that has obtained a certificate of authority to operate in the state is
admitted
Who is considered a nonresident agent?
an agent who resides in another state, but is licensed to write insurance in this state.
Group life insurance contracts are
annually renewable term insurance
The payment of premium and representations the application are called
consideration
An insurer who deliberately make a maliciously critical statement about another insurance company is guilty of an illegal trade practice called
defamation
The primary purpose of the accelerated death benefits rider is
early payment of a part of the death benefits to the insured
The state Department of Insurance is responsible for
enforcing the insurance code
The policy and a copy of the application, along with any riders and amendments, is called the
entire contact
Which provision of a life insurance policy states that the application is part of the contact?
entire contract
If no beneficiary is named in the policy, the death benefits is paid to the insured's
estate
How often must producers renew their licenses?
every 2 years
Which of the following arrangements allow someone living with a life threatening condition to sell an existing life insurance policy and use the proceeds before death?
viatical settlement
In a renewable term policy the additional premium pays for the right to renew the policy
with the same coverage amount regardless of the insured's death
Which of the following is an example of a limited- pay life policy?
Life paid- up at age 65 (higher premium)
The primary purpose of an investigative consumer report is to assess an applicant's
Lifestyle and habits
Which nonprofit organization collects and maintains adverse medical data on insurance applicant ?
Medical Information Bureau
Which of the following is NOT true regarding policy loans?
Money burrowed from the cash value is taxable
If a life insurance policy has an irrevocable beneficiary designation,
The beneficiary can only be changed with written permission of the beneficiary.
A flexible premium policy that may be term or permanent insurance is known as
Adjustable life
Which type of policy allows the insured to change the amount of the death benefits, amount of premium, or the type of coverage as their needs change?
Adjustable life (for their life needs)
Which of the following is NOT an example of a company's location of incorporation?
Authorized
If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered to be
Authorized.
In credit life insurance, who is responsible for paying the policy premium?
Borrower
A life insurance policy used to fund an agreement that contractually establishes the intent of someone to purchase a business upon the insured business owner's death is a
Buy-sell agreement. (Buy-Sell agreements are used to contractually establish the intent of someone else to purchase the business upon the insured's death, and to set a value (purchase price) on a business. Life insurance is used to fund the buy-sell agreement. Any type of life insurance may be purchased to provide the necessary funds for the agreement. Insurance can be used to either fully or partially fund the buy-sell agreement.)
The beneficiary second in line to receive the death benefits is the
Contingent beneficiary
The most common type of whole life insurance where premiums are payable over the whole life of the insured to age 100 is called
Continuous premium (straight) life
what term policy feature allows the policyowners to change to permanent coverage without evidence of insurability?
Convertible
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 (Credit life is most often sold by lenders and is term insurance written with a face amount and term that is matched to the amount and length of the loan period.)
Which of the following is true regarding the insurance amount in a credit life policy?
Creditor can only insure the debtor for the amount owed.
Which life policy is used to pay off a debt, like a home mortgage?
Decreasing term
Which of the following describes commingling of funds?
Depositing premiums into a personal account
Underwriting is the process of
Determining the insurance company' risk regarding a proposed insured
Who is the beneficiary of a key person policy ?
Employer
When a life insurance policy is cancelled and the insured has selected the extended term nonforfeiture option, the cash value will be used to purchase term insurance that has a face amount
Equal to the original policy for as long a period of time that the cash values will purchase.
Which annuities have interest rates tied to a fund like the S&P 500?
Equity indexed
An annuity in which investment growth is dependent on the performance of an index such as the standard and poor's 500 is called an
Equity indexed annuity
In a life insurance policy, hazardous occupation would be an example of a/ an ___.
Exclusion
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
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 Executive Bonus.)
Which policy component decreases in a decreasing term insurance?
Face amount
A reinstated life insurance policy is issued at the attained age of the insured
False
An accidental death rider may double or triple the face amount if the insured dies as a result of a sickness.
False
An insurance company may advertise that its polices are guaranteed by the Life & Health Guaranty Association.
False
Insurers may discriminate in life insurance policy rates based on the marital status of the insured.
False
Policy dividends are taxed as ordinary income to the policyowner.
False
The free-look period begins when the policy is approved by the insurance company
False
The reduction of premium dividend options reduces the premium payment for the current policy year.
False
An insurance company has published a brochure that inaccurately portrays the advantages of a particular insurance policy. What is this an example of?
False advertising
The use of words or symbols that are similar to which of the following entities is prohibited in life insurance advertisement?
Federal government
A producer delivers a policy to an insured, but nine days later the insured returns the policy and wants a complete refund. What provisions allows the insured to return the policy ?
Free look
Which is true about the cash surrender nonforfeiture option?
Funds exceeding the premium paid are taxable as ordinary income.
Which is true about the cash surrender nonforfeiture options?
Funds exceeding the premium paid are taxable as ordinary income.
Which rider would allow additional insurance at specified dates or events, without evidence on insurability?
Guaranteed insurability
Which of the following must be included in all life insurance advertisements?
Identity of the actual insurer
An employee quits his job and converts his group insurance to an individual policy. On which of the following will the premium for the individual policy be based?
Insured 's attained age
Which of the following policy components contains the company's promise to pay?
Insuring clause (The insuring clause contains the company's promise to pay.)
Which of the following would help prevent a universal life policy from lapsing?
Target premium (The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.)
If the cash value exceeds the premiums paid in a whole life policy, what are the tax consequences if the policy is surrendered?
The portion that exceeds the premiums paid is taxable
A single premium whole life policy has cash value immediately available for a policy loan
True
A traditional IRA is a type of a qualified plan
True
An annuity begins paying income a month after it is issued is a single premium immediate annuity
True
An immediate annuity has no accumulation period.
True
A agent's license must be renewed
every 2 years on the anniversary date of issurance
Each of the following is a typical characteristics of group life insurance EXCEPT
evidence of insurability is usually required.
The nonforfeiture options that provides insurance in the same amount as the original policy is
extended term
Which settlement options pays a specified payment until the money is gone?
fixed amount
Universal life policies have ____premiums.
flexible
The premium payment mode can be best described as the
frequently with which the policy premium will be paid
If a retirement plan or annuity is qualified, this mean it
has favorable tax treatment
What is the process by which one life policy is terminated and another is written in its place?
replacement
Statement in the application for insurance that are believed to be true to the best of the applicant's knowledge are called
representations
An annuity that is purchased with a lump-sum payment and begins income payment within one year is a
single premium immediate annuity
Who would normally purchase a deferred annuity?
someone who needs tax-deferred growth for retirement
The insured usually pays $1,200 annually for her life insurance premium. This year, she has accumulated $175 in dividends, and applied that to her next premium, reducing it to $1,025. What dividend options has the insured chosen?
Reduction of premium
Which of the following are Social Security benefits?
Retirement, disability, and survivors
A 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 (2 years)
Which of the following would be considered a disadvantage of term insurance?
If the insured dies after the end of the term, there is no death benefits to the beneficiary
An individual owns a adjustable life policy. Sometimes in the future he wants to increase the death benefit. Which of the following statement is correct regarding the death benefits increases?
It can be increased by providing evidence of insurability.
An insured submits the full premium along with a completed application, and the policy is issued 10 days later. When does the coverage begin?
On the date of the application
The shorter the premium-paying period of a whole life policy, the ____the total annual cost.
higher
Underwriting is a process of
risk selection and classification
Which of the following classifications would result in a rated policy?
substandard
Which of the following best describes the purpose of the USA PATRIOT Act with regards to the insurance, what must the agent do?
Inform the insurance company
In a life insurance policy, when must insurable interest exist?
A valid insurable interest may exist between the policyowners and the insured when they policy is insuring any of the following 1. policyowner's own life 2. the life of a family member (a spouse or a close blood relative) 3. The life of a business partner, key employees, or someone who has a financial obligation to the policy owner (such as debtor to a creditor)
Under what circumstances will the contingent beneficiary receive the death benefit?
if the primary beneficiary dies before the insured
The insured is also the policyowner of a whole life policy. What age must the insured attain in order to receive the policy's face amount?
100
If the policy premium has not been submitted with the application, upon policy delivery the agent must obtain____from the insured.
A statement of GOOD health
Whose life expectancy is taken into consideration in annuity?
Annuitant
A document that provides information for underwriting purposes is the...
Application
Which of the following would be the main source of underwriting information used by the company in the risk selection process?
Application "90% information comes from the application"
When must insurable interest exist in life insurance?
Application or issues date
Generally, the premium paid for personal life insurance is
Not tax deductible
If no receipt is issued at the time application, a statement of good health is usually required at the time of
Policy Delivery
Example: Insured :Jane Smith Agent: Bob Policy : term life policy period: 5 year premium: $300
Policy Summary
What is the term for the fee a policyowner must pay to the insurance company to maintain coverage ?
Premium
The agent's report includes the agent's personal observation concerning the proposed insured.
True
Which of the following is true of the fixed- period and fixed amount settlement options?
both guarantee that the principal and interest will be fully paid out (pay everything out )
All of the following are true regarding the guaranteed insurability rider EXCEPT
it is available automatically, for no extra premium
An annually renewable term policy
maintains a level premium each year
When a death claim is submitted, the insurer discovered that the insured understated her age on the application for a life policy. What actions will the insurer take?
pay a reduced death benefit based on the insured's actual age
A life insurance applicant discloses his or her medical history in the
policy application
Statements made by the insured on the application are considered
representation
A mutual interchange of rights and privileges is known as
reciprocity
Which dividend options may decrease future premium payments?
reduction of premium
The guaranteed insurability rider allows the insured to increase coverage at
specified future events
Life insurance companies and producers are regulated by the
state
A cease and desist order issued by the Department of Insurance means a person must
stop a specified trade practice
What is the risk classification for those who are insurable, but present a higher than average risk?
substandard
What is the main purpose of requiring licenses for persons who transact insurance?
to protect the general public
What is the purpose of the grace period in life insurance policies ?
to protect the policyowner against an unintentional lapse of the policy
A level term life policy has a level face amount and a level premium
true
An advantage of reinstating a lapsed policy is for coverage to be based on the original issue age
true
To prevent individuals from profiting from a loss, insurance companies must be certain that
Insurable interest exist
Which of the following occupations would NOT directly help to qualify someone for the office of Commissioner of Insurance?
Insurance agent
In an insurance transaction, which of the following does a a licensed producer represent?
Insurance company
Soliciting or negotiating with a prospect to purchase insurance is referred to as a/an
Insurance transaction
Who makes up the Medical Information Bureau?
Insurers (The Medical Information Bureau is made up of insurers so the companies can compare the information they have collected on a potential insured with information other insurers may have discovered.)
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?
Interest only option
Which of the following best describes a misrepresentation?
Issuing sales material with false statements about policy benefits (Misrepresentation is issuing, publishing or circulating any illustration or sales material that is false, misleading or deceptive as to policy benefits or terms, the payment of dividends, etc. This includes oral statements.)
Which statement is NOT true regarding a Straight Life policy?
It does not : Its premium steadily decreases over time, in response to its growing cash value.
Why is an equity indexed annuity considered to be a fixed annuity?
It has a guaranteed minimum interest rate.
What is the benefit of choosing extended term as a nonforfeiture option?
It has the highest amount of insurance protection
What is the special significance of a conditional receipt?
It is intended to provide coverage on a date earlier than the date of the issuance of the policy.
Which settlement options guarantees an income for two or more recipients for as long as they live?
Joint and Survivor
A specialized life insurance policy that pays on the death of the first insured is known as
Joint life
A whole life product that covers two lives and provides for payment of the death benefits on the death of the first insured is called
Joint life
What license is required to sell an equity-indexed annuity?
Life only
Which type of life insurance provides protection beyond the premium paying years?
Limited- pay Whole life
All other factors being equal, what would the premium be like in a survivorship life policy as compared to the premium in a joint life policy?
Lower
The annuity period is defined as the time in which the annuitant
receives payment
A current assumption or interest- sensitive whole life policy has
Premiums that the policy owner may change based on certain assumptions
Julie pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. Julie has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this?
Reduction of premium option
A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy
Required a premium increase each renewal
When the application is submitted without a premium payment, what is required at policy delivery?
Statement of good health
Social Security benefits include retirement, disability, and ___.
Survivors
First insured dies: no death benefits Last insured dies: death benefits paid
Survivorship life
The life insurance policy provision that prohibits an insurance company from denying a death claim after the policy has been in force for a specified period of time is the
incontestability
Which provision protects the insurer if a material misrepresentation is discovered on an application shortly after a policy is issued?
incontestability
What type of permanent insurance allows the policyowner to pay for policy in a specified period of time, and the policy owner does not have to make anymore premium payments for the life of the policy?
limited payment
When an employer pays all the premiums in a group policy, the plan is referred to as
noncontributory
Cash surrender, extended term, and reduced paid up- insurance are all
nonforfeiture options
If a producer licensed in a resident states wants to transact insurance in another state, the producer must obtain a
nonresident license
What is the main purpose of requiring license for persons involved in transacting insurance?
protect the public
An annuity is considered fixed when it does all the following EXCEPT
provides the annuitant with either the guaranteed or current interest rate, whichever is less.
In underwriting, ___ cannot be used as a factor to determine an applicant's insurability.
race
An agent who offers a cash reward to prospect for buying an insurance policy is guilty of
rebating
Which of the following is an unfair trade practice?
rebating
All the following may have an insurable interest in the insured EXCEPT
Insured's best friend
All of the following persons who do not have an employer-sponsored retirement plan would be eligible to set up contribution to a traditional IRA EXCEPT
Arelene, age 70, a nurse (70 1/2)
If a life policy does not pass the 7-pay test, that policy
Becomes a modified Endowment Contract
A conditional receipt guarantees that coverage will begin on the date of application
False (after the first payment)
