Life insurance practice exam
Which type of policy allows the insured to change the amount of death benefit, the amount of premium, or the type of coverage as there needs change?
Adjustable life
If a mist statement of age is discovered during the processing of a life insurance claim, what will the insured do
Adjusts the death benefit based on the premiums that were paid
If annuitant dies during the accumulation period, what will the beneficiary receive?
Either the cash value or the premiums paid, which ever is greater
Which of the following is true of a qualified plan?
It has a tax benefit for both employer and employee.
Which of the following types of annuities would be best suited for a retired couple who are seeking income for as long as either lives?
Joint and survivor
A long stretch of national economic hardship causes a 7% rate of inflation. A policy owner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy writer caused this change?
Cost of living Rider
All other factors being equal, which of the following types of policies will accumulate cash value at the fastest rate?
20-pay life
What is the penalty for IRA distributions that are below the required minimum for the year?
50%
An agent's actions show what kind of authority?
Apparent
For an insurance contract, the principle of utmost good faith means
Each party relies upon the truthfulness of the other
If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insured, it is called a
Joint life annuity
What type of annuity settlements stops when the annuitant dies?
Life annuity
Which type of annuity settlement stops when the annuitant dies
Life income annuity
An agent's actions or deeds show what kind of authority?
apparent
The transfer of a possible financial loss to another party refers to
insurance
An insurance agent represents the
insurer
All of the following are factors that an underwriter could use to select and classify risk except
national origin
Which statement is incorrect concerning policy dividends?
the insurer may guarantee dividends
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
An individual purchased a $100,000 joint life policy on himself and his wife. Eight years later, he died in an automobile accident. How much will his wife receive from the policy?
$100,000
If the director request information regarding a claim, within how many days must the insurer provide a response?
21 days
Insurers must keep records associated with a given policy for how many years after the policy expiration?
3
In Oregon, how long does a producer have to notify the Director of a change in location or name?
30 days
How long does an employee have to convert group policy coverage to an individual policy without evidence of insurability?
31 days
Which of the following retirement plans is a special tax favorite plan for nonprofit, charitable, educational or religious groups?
403 (b) Tax-sheltered annuity (TSAs)
An IRA uses immediate annuities to pay out benefits the IRA owner is nearly 75 years old when he decides to click distributions. What kind of penalty would the IRA owner pay?
50% tax on the amount not distributed as required
At what age can a participant receive distributions from a qualified plan without incurring a 10% penalty
59 1/2
* all of the following could own group life insurance except
A group needing low cost life insurance.
What documentation grants express authority to an agent?
Agent's contract with the principal
Which of the following applicants could the insured charge a higher rate of premium and not violate regulations regarding unfair discrimination?
An applicant who is a smoker
In an annuity, the accumulation money is converted into a stream of income during which time period?
Annuitization period
Simple plans require all the following except
At least 1,000 employees.
An individual has just borrow $10,000 from his bank on a five-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation?
Decreasing term
A producer agent must do all of the following when delivering a new policy to the insured except
Disclose commissions earned from the sale of the policy.
Life insurance death proceeds are
Generally not taxed as income
Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, yours until retirement, and inflation?
Human life value approach
Annually renewable term policies provide a level death benefit for a premium that
Increases annually
When a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income?
Interest only
What is the main purpose of a seven pay test?
It determines if the insurance policy is an MEC.
Which of the following is not true regarding a non-qualified retirement plan?
It needs IRS approval
Which of the following is true about the premium on the children's rider in a life insurance policy?
It remains the same no matter how many children are added
Which of the following is an example of a limited pay life policy?
Life Paid-up at Age 65
Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement and age 65. What would be the right policy for this client?
Limited pay whole life
The premium of a survivorship life policy compared with that of a joint life policy would be
Lower
Which of the following best describes gross annual premium?
Net premium plus expenses
What is a definition of a unilateral contract?
One-sided: only one party makes an enforceable promise
Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured?
Option B
A man decided to purchase a $100,000 annually renewable term life policy to provide additional protection until his children finish college. He discovered that his policy
Required a premium increase at each renewal
A policy owner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policy owner should have her husband named as the
Revocable beneficiary
Equity indexed annuities
Seek higher returns
Which of the following policies would be classified as a traditional level premium contract?
Straight life
In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports?
The customer's associates, friends, and neighbors provide the report's data.
Which of the following describes the tax advantage of a qualified retirement plan?
The earnings in the plan accumulate tax deferred.
What is the advantage of reinstating a policy instead of applying for a new one?
The original age is used for premium determination
Which of the following is true regarding a market value adjusted annuity?
The owner is guaranteed a fixed interest rate for a specific period of time.
* What happens if a deferred annuity is surrendered before the annuitization period?
The owner will receive the surrender value of the annuity.
Which of the following best describes what the annuity period is?
The period of time during which accumulated money is converted into income payments
Which of the following best defines target premium in a universal life policy?
The recommended amount to keep the policy in force throughout its lifetime
Annuities can be used for all the following reasons except
To create an estate
Which of the following is the best reason to purchase life insurance rather than annuities?
To create an estate
The paid-up addition option uses the dividend
To purchase a smaller amount of the same type of insurance as the original policy.
An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will the coverage begin?
When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health
Are insurance company underwriters allowed to discriminate?
Yes, but not unfairly
All of the following are personal uses of life insurance except
buy-sell agreement
Which of the following will not be an appropriate use of a deferred annuity?
creating an estate
What is the primary purpose of a 401(k) plan
retirement
An adjustable life policy owner can change which of the following policy features?
the coverage period
Under a SIMPLE plan, which of the following is TRUE regarding taxation on both contributions and earnings?
they are tax deferred until withdrawn
If a policy includes a free look period of at least 10 days, the buyers guide may be delivered to the applicant no later than
with the policy
Which of the following is NOT a nonforfeiture option in whole life policies?
Accumulation at interest
The "pay in" phase of the annuity is known as what?
Accumulation period
An annuity that guarantees a minimum rate of return is known as a/an
Fixed annuity
What insurance concept is associated with the names Weiss and Fitch?
Guides describing company financial integrity
Which of the following is not true regarding the accumulation period of an annuity?
It would not occur in a deferred annuity.
Mutual companies are owned by
Policyowners
Which of the following is true about a license reinstatement?
Reinstatement fees may be double the unpaid renewal fee
An insured will be allowed to reactivate her lapsed life insurance policy if action is taken within a certain period of time, and proof of insurability is provided. Which policy provision allows this?
Reinstatement provision
Which of the following is called a "second-to-die" policy?
Survivorship
At age 25, an individual purchased a decreasing term policy. What happens to the coverage and the premiums as the insured gets older?
The coverage decreases but the premium stay the same
Risk and insurance terminology refers to
Uncertainty of financial loss
The waiver of cost of insurance rider is found in what type of insurance?
Universal Life
Which of the following annuity products require an agent to hold a securities license
Variable annuities
What do employees covered under a group contract receive?
certificate of insurance
Each of the following is a typical characteristic of group life insurance except
evidence of insurability is usually required
A life settlement option that pays out the death benefit incrementally, in a specified amount until all of the proceeds are exhausted, is called
fixed-amount installments
What is the risk classification for those who are insurable, but have a higher than average risk?
substandard
What is the purpose of the grace period in life insurance policies?
to protect the policyowner against an unintentional lapse of the policy
When an annuity is written, whose life expectancy is taken into consideration?
Annuitant
Betty is the only beneficiary named on her husband Bob's policy which has a Common Disaster provision. They are in a car wreck, and Bob dies instantly. Betty lives for 29 days. Who will receive the death benefit?
Bob's estate
Two business partners own life insurance on each other if one partner dies which of the following contracts will allow the surviving partner to use the death benefit to purchase the deceased business interest?
Buy-sell agreement
To prevent people from taking advantage of minors or the insane, a contract must have which element?
Competent parties
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
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
The policy and a copy of the application, along with any riders and amendments, is called the
Entire contract
An annuity in which investment growth is dependent on the performance of an index such as a Standard and Poor's 500 is called a (n)
Equity Indexed Annuity
If a change needs to be made to the application for insurance, the agent may do all of the following except
Erase the incorrect answer and record the correct answer.
An agent delivers a policy to an insured, and 9 days later the insured returns the policy and wants a complete refund. What provision covers the circumstance?
Free look
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
Which authority is not stated in an agent contract but is required for the agent to conduct business?
Implied
In a fixed annuity, which of the following is true regarding the guaranteed interest rate on the investment?
The annuitant will receive the higher of either the guaranteed minimum rate or current rate.
The premium payment mode can be best described as the
The frequency with which a policy premium will be paid
Who bears the investment risk in a fix annuity?
The insurance company
Annuities may be purchased with all of the following payment methods except
deferred
An insurer mails an insurance policy to a new policy owner. When the insurer relinquishes control of the policy, the policy is considered
delivered
Underwriting is the process of
determining the company's risk regarding a proposed insured
An insurance company that is formed under the laws of another state is known as what type of insurer?
foreign
The automatic premium loan provision is activated at the end of the
grace period
What type of permanent insurance allows the policy owner to pay for a policy in a specified period of time, and the policy owner does not have to make any more premium payments for the life of the policy?
limited payment
What does the payor benefit rider protect?
premium payments for a juvenile policy
Annuities can be used to fund which of the following?
retirement plans
To prevent people from profiting from a loss, insurers must be certain
Insurable interest exist
The mode of premium payment
Is defined as the frequency and the amount of the premium payment.
Which of the following is true about the mandatory free-look period in a life insurance policy?
It commences when the policy is delivered
Statements in the application for insurance that are believed to be true to the best of the applicants knowledge are called
Representations
To sell variable life insurance policies, an agent must receive all the following except
SEC registration
Variable insurance and variable annuities are regulated by
SEC, FINRA, and Departments of Insurance
An annuity that is purchased with a lump sum payment, and that begins income payments within one year is a
Single Premium Immediate Annuity
All other factor being equal, which of the following types of annuities will provide the highest monthly income?
Straight life
Which of the following types of risk will result in the highest premium?
Substandard risk
The time period during which an annuitant contributes to an annuity is called
The accumulation period
Which of the following is not true regarding the annuitant
The annuitant cannot be the same person as the annuity owner.
The MIB is a nonprofit trade Association that maintains
Medical information on applicants for life and health insurance
What factors are used to determine gross premium?
Mortality + expense - interest
Any insure who is not approved to do business in the state is considered
Non-admitted
A life insurance death benefit paid in a lump sum to a beneficiary is
Not subject to any taxes
Money borrowed from the policy's cash value is
Not taxable
Which of the following is usually true of a participating life insurance policy?
Pays dividends to the policy owners.
Which of the following allows an insurance company to deny coverage if the insured's death occurs in a war
Policy exclusions
Which of the following will be included in a policy summary?
Premium amounts and surrender values
An annuity is considered fixed when it does all of the following EXCEPT
Provides the annuitant with an interest rate that is the lesser of the guaranteed or current rate
This part of the application provides information about an applicant's financial condition and character, as well as the purpose of sale and how long the agent has known the applicant
Agents report
London mutual life is an insurer incorporated in England, and is transacting business in the state. London mutual would be considered what type of insurer?
An alien insurer
Who can make a fully deductible contribution to a traditional IRA?
An individual not covered by an employer-sponsored plan who has earned income
Which of the following indicates the person upon whose life the annuity income amount is determined
Annuitant
Employer contributions made to a qualified plan
Are subject to vesting requirements
The legal transfer of all or part of a policyowners rights, title or interest is called an (a)
Assignment
Which of the following is not true regarding a certificate of authority?
It is issued to group insurance participants.
A whole life product that covers two lives and provides for payment of the death benefit on the death of the first insured is called
Joint Life
Which settlement option guarantees an income for two or more recipients for as long as they live?
Joint and survivor
An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it?
Limited-Pay Life
What does an annuity protect the contract owner against?
Living longer than expected
How often may a life settlement provider contact and insured regarding the insured's health status of the insured's life expectancy is more than one year?
Once every 3 months
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.
When contributions to an immediate annuity are made with before tax dollars, which of the following is true of the distributions?
Distributions are taxable
