Life Insurance Final Exam A
If the initial premium is not received along with the application, the agent upon delivery of the policy must obtain it as well as:
A statement that the applicant's health has not changed since initial application
Mr. Jones bought an annual renewable term policy with a face amount of $200,000 on April 1, for an annual premium of $400. If he died the following year on May 15th without paying his renewal premium when due, his insurer would pay:
Nothing
A joint life insurance policy will pay:
On a first-to-die basis
What are the tax implications when an annuitant elects to take a cash surrender of a deferred annuity during the accumulation period at age 56:
Only the interest is taxable as ordinary income, but the interest is also subject to an IRS 10% early withdrawal penalty
Which of the following riders is added to a policy written on the life of a child to make sure the premium is paid if the policyholder dies or becomes disabled:
Payor benefit rider
Generally, all of the following are true, EXCEPT:
Producers may project future dividends on a non-participating policy
All are true about life insurance, EXCEPT:
The 1035 Exchange must always be with the same company that issued the first policy
All are true about the agent's duties, EXCEPT:
The agent must cash the applicant's check prior to delivering the policy
Under the Fair Credit Reporting Act, if a customer is rejected due to adverse information contained in a consumer report, all of the following are true, EXCEPT:
The client must get a court order to be able to access such reported information
A client has a whole life policy with a stated cash value of $1,500 and a loan outstanding in the amount of $500. What is their cash surrender value:
$1,000
A 30-year-old client buys a 30-year level term life insurance policy with a face amount of $200,000. If they die at age 45, the insurer will pay their beneficiary:
$200,000
Most life insurers will permit the owner of a lapsed policy to apply for reinstatement for up to ____ years.
3
All of the following are true about life insurance policies, EXCEPT:
A policy holder may revoke an absolute assignment
All of the following are true when a life insurance premium is overdue, EXCEPT:
A policy will be reinstated without a physical exam if overdue premiums are paid
Insurance companies doing business in this State may be _________ corporations:
Any of the listed options
All of the following are typical exclusions in a life insurance policy, EXCEPT:
Auto
All are part of the "entire contract," EXCEPT:
Changes made by the agent
Which clause in a life insurance policy states "This policy is issued in consideration of the premium paid and the statements made on the application":
Consideration
A 30-year mortgage obligation is best protected by what type of insurance:
Decreasing Term
Which of the following life insurance beneficiaries is not exempt from the claims of creditors:
Estate
A life insurance policy may include provisions that do all of the following, EXCEPT:
Extend the contestable period beyond two years
All of the following are dividend options on a life insurance policy issued by a mutual insurer, EXCEPT:
Extended term option
A rider added to a life policy to create coverage for your entire family is the:
Family Rider
Which of the following avocations is not important when underwriting an individual policy:
Fire fighting
An insurer selling life and health insurance to their own members only is a:
Fraternal company
Which type of annuity will make payments only until the death of the annuitant:
Life income
Term life is usually sold to clients who:
Need a lot of coverage but cannot afford permanent insurance
All of the following should be considered when determining the amount of life insurance a client needs, EXCEPT:
Self-maintenance costs
An IRA purchased by an employer to cover employees is known as a:
Simplified Employee Pension plan
The Spendthrift Clause on a life insurance policy keeps the beneficiary from doing any of the following, EXCEPT:
Spending the proceeds
If, after discussing the customer's investment objectives and needs, the customer and the producer agree upon an annuity, the purchase would be considered to be:
Suitable
On an annuity, which of the following can surrender the contract for cash during the accumulation (pay-in) period:
The policy owner
All are true about a preferred risk for life insurance, EXCEPT:
The rates and benefits of the policy are based on the Standard Mortality Table
Which of the following is true about life insurance policy dividends:
They may be used to reduce premiums, when due
All of the following are true regarding immediate annuities, EXCEPT:
They may not have a beneficiary
All of the following are true about Group life insurance, EXCEPT:
They provide a source of income for the employer
A life insurance customer misstates their age as being five years less than it really is. The rate they pay is $13 per $1,000 of coverage, but the correct rate is $15 per $1,000. If they die, how much will the insurer pay:
13/15ths of the face amount purchased
An insurable interest exists in all of the following situations, EXCEPT:
A son-in-law on the life of his father-in-law
All of the following are true about annuities, EXCEPT:
An immediate annuity requires the policy owner to make periodic payments into the general or separate account
All of the following are true about fixed annuities, EXCEPT:
Annuities create an estate and are therefore subject to underwriting
Which of the following transactions is not an eligible IRC 1035 Exchange:
Annuity to whole life
All of the following are true regarding 529 College Savings plans, EXCEPT:
Contributions are tax deductible
An adjustable whole life policy allows for the adjustment of all of the following, EXCEPT:
Expense loading
If an insured covered by a $100,000 life insurance policy dies and the beneficiary elects to take the proceeds and interest at $5,000 a month, they have selected which of the following settlement options:
Fixed amount
All of the following are true regarding credit life insurance, EXCEPT:
It is usually written as level term coverage
All of the following are true regarding life insurance loans, EXCEPT:
Policy owners may borrow up to the face amount of their policy
All of the following are true regarding qualified plans, EXCEPT:
Rollovers are subject to tax unless reinvested within 30 days
Which type of life insurance offers only pure protection:
Term
Which one of the following provides the clearest source of authority that can be exercised by an agent:
The agent's contract with the insurance company
Universal life policies have all of the following, EXCEPT:
The cash value invested in a separate account
The interest adjusted cost comparison index includes all of the following factors, EXCEPT:
The earnings in the separate account
All of the following are true regarding variable life insurance, EXCEPT:
The minimum rate of return is guaranteed by the insurer
To determine a life insurance applicant's human life value, a producer must consider:
Their lifetime earnings potential
All are true about immediate annuities, EXCEPT:
There is no cost basis for the annuitant
The "cost of insurance" rider is attached to which type of life insurance policy:
Universal life
Which type of life insurance allows a policy owner to take a partial surrender:
Universal life
Which type of life insurance pays a guaranteed minimum rate of return, but could pay more:
Universal life
Taxes on the accumulated interest in the cash value account of a whole life policy may be due:
Upon cash surrender
All of the following are true regarding employee Group Life insurance, EXCEPT:
Upon conversion, the premium is based upon the employee's age at enrollment
On adjustable whole life, the policy owner may do all of the following, EXCEPT:
Use non-forfeiture provisions to buy additional insurance
When an insured sells or assigns their life insurance policy to another party in order to get money to pay for terminal expenses, it is known as a(n):
Viatical settlement
When selling a market value adjusted annuity, you must state all, EXCEPT:
Future payments will be based upon past investment experience
In which of the following areas could the actions of an insurance agent cause a company to be liable:
Implied agency
To calculate a net single premium, a life insurance company would subtract which of the following from the cost of mortality:
Interest
Which life insurance non-forfeiture option will result in a face amount that is lower than that of the original policy:
Reduced paid-up
The premium on annual renewable term life insurance:
Will increase every year
The amount of annuity benefits included in the value of the estate of a deceased life income annuitant is:
Zero
All of the following are true regarding the advertising of life insurance, EXCEPT:
Advertising is prohibited
An insurance company that is domiciled in another country, but authorized to do business in this state is considered to be:
Alien
A valid 1035 Exchange of a life insurance contract must be:
On the life of the same person
If the initial life insurance premium is not pre-paid, coverage will be effective:
When the policy is delivered and the first premium is paid
The rules regarding replacement always apply when replacing which of the following types of life insurance:
Whole life
Once classified as a Modified Endowment Contract (MEC), the contract will remain that way:
Forever
When the living beneficiaries on a life insurance policy share the proceeds equally, it is known as a _____________ beneficiary designation:
Per capita
Who does a life settlement broker represent:
Policy owner
All are true regarding replacement of life insurance, EXCEPT:
Replacement is unlawful
A client can make the "Presumption of Agency" if agent Smith does any of the following, EXCEPT:
Represents the client in finding the best coverage and premium available
The authority that an agent has, but is not expressed in their contract is known as _______ authority:
Implied
When a creditor has a temporary interest in a life insurance policy, it is known as a(n):
Collateral assignment
A life insurance policy sold to each spouse, rather than a joint life insurance policy sold to cover both spouses, would have all, EXCEPT:
Coverage only for whichever spouse dies first
A business has an insurable interest in all of the following, EXCEPT:
Customers
Which of the following is considered to be irrevocable:
Absolute assignments
All of the following are true regarding Key Person life insurance, EXCEPT:
Employers may deduct the premiums paid as a business expense
Grandma has $250,000 to invest. Although she needs income, she also wants to leave money to her five grandchildren when she dies. What should she buy:
Immediate annuity with refund option
Upon your death, if your beneficiary chooses the interest only settlement option, the:
Interest is taxable
All are true about the rider called Accidental Death Benefit, EXCEPT:
It pays double when the insured dies as a result of sickness
Most group life insurance is what type of coverage:
Level Term
All of the following are considered to be misrepresentation, EXCEPT;
Making comparisons between policies
If a life insurance policy is purchased and fails to meet the seven-pay test, it is considered by the IRS to be a:
Modified Endowment Contract (MEC)
A customer buys a whole life policy and pays $700 a year for the first five years. After that, the premium increases to $1,100 a year and stays level at that amount thereafter. What type of life insurance did they buy:
Modified premium
Regarding life settlements, the difference between the face amount and the cash value is known as the:
Net value
The mode of premium provision addresses:
The frequency of payment
Ryder buys an annuity naming Gerry and Cheryl as co-annuitants. The amount of the monthly payments during the annuity period will be based upon:
The joint life span of both Gerry and Cheryl
All are true about a Limited Pay Whole Life policy, EXCEPT:
The policy will reach maturity at the end of the premium paying period
All of the following are true regarding the rules regarding the replacement of life insurance, EXCEPT:
They apply when replacing all types of life insurance
All of the following are true about orders from the Commissioner or Director, EXCEPT:
They are final
All of the following are true regarding accelerated benefits, EXCEPT:
They are treated as a policy loan
All of the following are true about annuities, EXCEPT:
They are used to create an estate for the insured's family
All of the following are true regarding a mutual insurer, EXCEPT:
They guarantee the payment of future dividends
Reinsurance is used for all of the following purposes, EXCEPT:
To increase unearned premium reserves
