Life Insurance Practice Test
An insured has a terminal illness and needs access to half of his death benefit to pay for medical expenses. Which rider would meet the insured's current needs?
Accelerated (Living) Benefit
Which of the following distributions from a qualified retirement plan will incur a 10% tax penalty?
Before the participant's age 50 1/2
An individual has a $50,000 convertible term life insurance policy. If he chooses, he can
Convert to a whole life policy for the same face amount without proof of insurability
Decreasing term insurance is often used to
Cover a mortgage
All of the following information needs to be included on an application for life insurance EXCEPT
Health insurance policies in force
Which of the following would be the most likely to start a tax-sheltered annuity?
Public school teachers
A person is required to be licensed to do which of the following?
Receive commissions
What is the purpose of settlement options in life insurance?
The determine how death proceeds will be paid
After 12 years, a policyowner decides she no longer needs the large death benefit on her whole life policy. She calls her agent, who informs her that she can use the reduced paid-up nonforfeiture option. Which of the following is NOT true about the new policy?
The new policy will expire in 10 years
What is the purpose of the agent's report in the application process?
To provide additional information about the applicant to the underwriters
Which statement about reinstatement is FALSE regarding a policy reinstatement provision?
A reinstated policy is incontestable
When agents, brokers, or solicitors handle premiums for an insurer, they are acting in which capacity?
As a fiduciary
Under a straight life annuity, if the annuitant dies before the principal amount is paid out, the beneficiary will receive
Nothing; the payments will cease
When a life insurance policy continues because of a payor benefit clause, it means
The owner of the policy is disabled or has died
What is the default nonforfeiture option when the policyowner neglect to select an option?
Extended 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
All of the following statements describe unfair trade practices EXCEPT
Discriminating against a group of individuals because of poor risk
If a beneficiary is NOT named for annuity benefits, to which of the following will the benefit be paid?
The annuitant's estate
An insured, age 45, has a paid-up at age 65 whole life insurance policy with a death benefit of $150,000. The policy's cash value will be $150,000 at the insured's age
100
An insured missed her premium payment on her cash value policy, and the grace period has lapsed. The policy is still in force because the insurer has deducted the cost of the premium from the policy's cash value. What provision allows this?
Automatic premium loan
Which of the following would be considered a peril?
Fire
An insurer invests the cash value of a fixed annuity in which of the following?
General account
Which statement best describes "agreement" as it relates to insurance contracts?
One party accepts the exact terms of the other party's offer
All of the following are general requirements of a qualified plan EXCEPT
The plan must be temporary
When the insured becomes disabled under the requirements of a life insurance policy, which of the following provisions keeps the policy in force even though the owner stops making the premium payments?
The waiver of premium
An insured's flexible premium is invested into a separate account. What type of insurance product does the insurance have?
Variable universal life
If $100,000 of life insurance proceeds were used in a settlement option that paid $13,000 per year for ten years, which of the following would be taxable annually?
$3,000
Under the cost of living adjustment rider, what will happen to the face amount in the policy?
An increase with the inflation rate
An out-of-state producer wants to start selling insurance in this state. What type of license should the producer obtain?
Nonresident
Which nonforfeiture option allows a policyowner to use the existing cash value to purchase a policy of the same face amount as the original policy for as long as the policy will buy?
Extended term insurance
An individual owns a participating whole life policy and uses her policy dividends to buy more of the same type of coverage for herself. She has chosen the
Paid-up additions option
When is the earliest a life policy may go into effect?
When the application is signed a check is given to the agent
Which of the following risk classifications would pay the lowest premium?
Preferred
Which of the following is NOT a feature of a whole life policy?
Increasing premium
Which of the following are members of the Medical Information Bureau?
Insurers
All of the following are dividend options in life insurance policies EXCEPT
Interest only
Statements made by the applicants for insurance policies that are true to the best of their knowledge are known as
Disclosures
Under the terms of the 10-day free-look period, a claim will be paid
If the premium has been paid and the policy has not been returned
An employee wants to join a group insurance plan. In order to avoid proving insurability, what must the applicant do?
Join during the enrollment period
What is the usual federal income tax treatment of individual life insurance?
Nondeductible premiums, nontaxable death benefits
An insurer is issued a cease and desist order for misrepresentation. What is the insurer required to do to comply with the order?
Stop the action in violation
Which of the following types of insurance products would be appropriate for an individual with a low income and high insurance needs?
Term insurance
To which of the following must insurance producers report changes of business or residence address?
The Department of Insurance
Which division of an insurance company is responsible for the selection, evaluation, and distribution of risks?
Underwriting
A beneficiary decides to take a settlement option that will pay the largest amount per payment, knowing that after the beneficiary's death no monies will be paid out to any descendants. The settlement option is
Life Income (Straight Life)
Which of the following is the default settlement option for life insurance policy proceeds?
Lump sum
When an applicant makes a material statement on the insurance application, the statement is considered to be a/an
Representation
If a life agent wants to sell variable life policies, what license must the agent obtain?
Securities
For an insurance contract, the principle of utmost good faith means
Each party relies upon the truthfulness of the other
For a flexible premium deferred annuity, the time during which the owner makes premium payments and the time before benefit payments begin is known as the
Accumulation period