Life Insurance Prep
The settlement option that will pay the largest amount to the beneficiary regardless how long he lives is?
The life only OR straight life
Cal, age 57, owns a whole life insurance with a $750,000 face amount that was paid for in 2002 with a single premium of $100,000. The current cash value is $125,000. If he were to borrow $30,000 from this policy today, which of the following choices best describes the tax treatment this transaction will receive?
25,000 of the loan is subject to income taxation plus an additional 10% tax penalty.
The grace period of an individual life insurance policy must be at least how many days?
30 days
A producers license may not be suspended for more than:
36 Months
How long must an insurance company maintain its advertising files?
4 years
Individuals who reside in and are licensed as producers in another state do NOT need to meet which of the following requirements to be issued nonresident licensees? A- Certify that they will not negotiate contracts with an insurer who is not qualified to do business in AR. B- Complete the required relicensing education in AR. C- Pay the required licensing fee. D- Already hold a license of the same classification in their state of residence.
ANSWER- B
Which of the following is NOT a mandatory provision in a group life insurance policy? A- Certificate Provision B- Policy Loan Provision C- Misstatement of Age Provision D- Incontestability Provision
ANSWER- B
Which of the following is an accurate statement for a producer to make regarding underwriting? A- A consumer report must be requested B- The primary source of information used in underwriting will be the application. C- The MIB will contact the applicant for additional info D- The applicant must provide a list of the sources and give permission to contact them.
ANSWER- B
Regarding a replacement transaction, which of the following is NOT required by insurers? A- A statement, signed by the agent, certifying that he or she knows that replacement may be involved. B- A statement, signed by the applicant, reporting whether or not the transaction will involve replacement. C- A comparison of the existing life insurance policy to the proposed life policy D- A statement, signed by the existing insurer, allowing the replacement.
ANSWER-D
Which of the following is NOT a business use of life insurance? A- Buy sell funding B- Key person coverage C- Deferred compensation D- Estate conservation
ANSWER-D
Type of insurer incorporated under the laws of a country other than the United States is known as an
Alien Insurer
How often must the commissioner examine domestic insurers?
At least every 5 years
A variable annuity is based on what?
Equity Investments (Stocks and Bonds)
Frank owns and is insured by a participating whole life insurance policy with a death benefit of $85,000, including $35,000 of paid up additions to the face amount. His basis in the policy is $30,000. The beneficiaries are his daughter and son, equally. If he were to die today, what amount of this policy would be valued in Franks estate?
$85,000
Interest earned and distributions made are tax free if a Roth IRA is maintained for at least how many years?
5 years
For a beneficiary to receive accidental death benefits, death of the insured generally must occur within how many days following the accident?
90 days
How long does a nonresident agent or broker have to apply for a resident license?
90 days
If a nonresident producer moved permanently to AR, the producer has how many days to apply for a resident license?
90 days
At a certain point in time, an employee will have nonforfeitable right to the money contributed to a pension plan by the employer. This right is known as:
A Vested Interest
What is an authorized insurer?
A company that is authorized by the commissioner to transact business in AR.
When Lisa applied for a life insurance policy, the agent issued a receipt stating that coverage will be effective only after the insurer has approved the application and before the policy is delivered. This type of receipt is known as:
A conditional Receipt
All of the following are required provisions in life insurance policies EXCEPT A- A replacement Provision B- A reinstatement Provision C- A 1 month grace period for payment of premiums D- a misstatement of age provision
ANSWER- A
All of the following are rights of the policy owner EXCEPT A- to determine the method of submitting claims B- to select a nonforfeiture option C- to designate a beneficiary D- to assign the policy
ANSWER- A
All of the following individuals are exempt from the continuing education requirements EXCEPT? A- A person holding an active producers license for 20 consecutive years B- A person who is at least 55 years old C- A firm acting as a licensee D- Nonresident Producers
ANSWER- B
The replacement regulation applies to all of the following policies EXCEPT A- Group Life Insurance B- Individual Whole Life C- Term Life D- Credit Life
ANSWER- B
The replacement regulations apply to which of the following: A- Credit Life Insurance B- Term Life Insurance C- Individual Universal Life Insurance D- ALL OF THE ABOVE
ANSWER- B
Which of the following statements about the spendthrift clause is NOT correct? A- Once the beneficiary has received payments for the proceeds, the creditors can take steps to attach those payments. B- It gives the beneficiary the right to use the death benefit as collateral for a loan. C- It states that the life policy proceeds will be paid directly to the beneficiary. D- It helps protects the death benefit proceeds from the beneficiary's creditors.
ANSWER- B
Which of the following statements regarding nonqualified annuities and their tax treatments is NOT correct? A- Interest earnings accumulate tax deferred and are taxed when distributed B- Premiums are tax deductible C- The 10% early withdrawal tax penalty is waived if the owner is disabled D- Nonqualified annuities are LIFO contracts, meaning that the last money credited is the first money distributed in a withdrawal.
ANSWER- B
A family in which both parents work and, therefore, are in need of the same amount of coverage, would be a candidate for which of the following plans? A- Family Plan B- Juvenile Plan C- Joint life D- Family maintenance
ANSWER- C
Annuities may be purchased with all of the following payment methods EXCEPT A- A schedule of flexible payments B- A scheduled of fixed payments C- A single payment that may be deferred for 5 years D- A single lump sum payments
ANSWER- C
In contrast to traditional whole life insurance policies, with variable life insurance products A- Premiums are invested in an insurer's general account B- Investments match the insurer's contractual guarantees and liabilities C- Contact Cash values are not guaranteed D- The insurer assumes the investment risk
ANSWER- C
Malia purchases a $50,000 5-year level term. Which of the following statements about Malia coverage is NOT correct? A- If Malia lives beyond the 5 years, the policy expires and no benefits are payable. B- If Malia dies at any time during the 5 years, the beneficiary will receive the policy's face value C- If Malia dies after the specified 5 years, only the policy's cash value will be paid D- The policy provides a straight, level $50,000 of coverage for 5 years.
ANSWER- C
The AR life and disability insurance guaranty association cannot provide which of the following services to impaired domestic insurers? A- Loan money to the impaired insurer B- Reinsure any of the impaired insurers covered policies C- Cover a policy issued by a fraternal benefit society D- Provide pledges needed to assure payment of the impaired insurers contractual obligations.
ANSWER- C
Which of the following is a required provision in all individual life insurance policies? A- Open enrollment B- Assignability C- Reinstatment D- Conversion
ANSWER- C
Which of the following statements about accelerated living benefits is NOT correct? A- They are provided at no additional cost to the policy owner B- They allow access to the policys face value C- The proceeds must be spent on the insured's medical expenses D- they are standard life insurance policies
ANSWER- C
Which of the following statements regarding exclusive agents is NOT true? A- Exclusive agents represent the insurer B- Exclusive agents are usually compensated by commissions C- Exclusive agents represent the insured D- Exclusive agents represent only 1 company
ANSWER- C
All of the following are distinguished characteristics of straight whole life EXCEPT A- Option to renew B- Insurance protection to age 100 C- Cash values D- Level premiums
ANSWER-A
Which of the following is NOT a duty of the Insurance commissioner? A- Writing AR insurance laws B- Granting license to agents C- Conducting hearings D- Making rules and regulations to help interpret the state laws.
ANSWER-A
All of the following types of groups are eligible for life insurance EXCEPT: A- Employer Group Plans B- A Group of Creditors C- Trade Association Groups D- Labor Union Groups
ANSWER-B
All of the following events are allowable reasons to take an early withdrawal from an IRA from an IRA and not pay a tax penalty EXCEPT A- Qualifying medical expenses B- Disability C- Purchase of a vacation home D- Death
ANSWER-C
AGC Publishing applied for key-person life insurance on its chief executive officer. Which of the following parties must sign the application?
The CEO, another officer of AGC, and the agent handling the application.
If both an older and younger person had annuity funds of the same amount and simultaneously began to receive monthly life payments, which individual would receive the LARGER payments?
The older person
For a waiver of premium rider to become operative, the insured must be-
Totally disabled
When conducting an examination, the insurance commissioner cannot do which of the following: A- Require the production of documents B- Administer Oaths C- Subpoena Witnesses D- Compel the examinee to pay all costs even if he or she was exonerated.
ANSWER- D
When he was 45, Frank purchased a $40,000 5-year level term policy. When he died at age 52, his beneficiary received how much?
$0
Jay has a $50,000 life insurance policy with an accidental death benefit that pays triple the face amount. If Jay commits suicide three years after purchasing the policy, how much will his beneficiary receive?
$50,000
The insurance commissioner may conduct hearings regarding insurance matters by giving how many days' notice to the parties involved?
10 days
Because increasing term insurance can be added to permanent policies and, when added, is less expensive than a stand alone policy, it is almost always sold as?
A Rider
Ron, the insured, dies during the grace period for his $100,000 life insurance policy. Considering that the premium on the policy has not been paid, what happens? A- the premium is canceled because the insured died during the grace period B- the amount of the premium is deducted from the policy proceeds paid to the beneficiary C- the premium due, plus a 10% penalty, is charged against the policy D- The beneficiary must pay the premium after the death claim is paid
ANSWER-B
Which of the following is NOT an approved type of group life insurance? A- Labor Union Group B- Family Group C- Debtor Group D- Employee Group
ANSWER-B
Which of the following does NOT constitute a violation of the advertising regulations of the insurance code? A- Inflating the dividend amount when discussing the policy's advantages with potential policyholders B- Rebating Premiums C- Paying bonuses to life insurance policy holders out of surpluses from nonparticipating insurance D- Circulating a statement claiming that another insurer is in danger of going bankrupt.
ANSWER-C
Which of the following is NOT a mandatory provision is an individual life insurance policy? A- Incontestability provision B- Right to return the policy C- 31 day grace period D- Entire contract Provision
ANSWER-C
What is an insurer's license to do business in Arkansas called?
Certificate of Authority
What is the most common approach for rating life insurance applicants who are determined to be Substandard Risk?
Issuing a policy in the amount applied for, with a higher than standard premium.
What dividend option produces a result similar to taking dividends in cash and depositing them in a savings account?
Leaving dividends to accumulate interest
What are accelerated benefits?
Life insurance death benefits paid before the death of an insured with a terminal illness
A principal function of annuities is to
Liquidate an estate
Mutual insurers issue what kind of policies?
Participating
Paul, age 62, is applying for a universal life insurance policy and wants to arrange the beneficiary designation in such a way as to use the proceeds to provide lifetime income to his wife, Marsha. Which of the settlement options is best suited for this purpose?
Paul, as the owner, can pick life insurance as the settlement option his spouse must take when he dies. This option will give Marsha monthly income she cannot outlive.
In group insurance plans, if the plan is noncontributory, the employer
Pays the entire premium
If a producer misleads or fails to adequately disclose the title and true nature of a policy offered to a potential insured, it may be considered
Twisting
Denise, age 52, has a straight whole life policy and decides to stop paying premiums and take a paid up policy for a reduced amount. Her paid up policy will be:
Whole Life
Selena is a single parent paying for her home. She is concerned about where her children will live if she suddenly dies. Her primary reason for purchasing life insurance is...
Mortgage Payoff
Sidney, age 58, owns a deferred variable annuity that he purchased 15 years ago and into which he has paid $25,000 in the form of periodic premiums. Today its cash value is $37,000. If he dies today, which of the following statements best describes the tax treatment this transaction will receive?
Of the cash value, $25,000 is payable to the beneficiary income tax-free, $12,000 is subject to income taxation.
Universal life is distinguished from whole life insurance in that...
Partial withdrawals can be taken from the cash value account.
Ben is considering the purchase of a $75,000 whole life policy. What option would tend to lower his premiums?
Paying premium annually as opposed to monthly.
John, age 55 owns a whole life policy with a face amount of $100,000 for which the annual premium is $1,000. John explains to his agent that he lost his job and cannot afford his $1,000 annual premium but still desires to have life insurance to age 100. What nonforfeiture could johns agent recommend to him?
Reduced paid-up policy
In which of the following circumstances would be the incontestable clause of an insurance policy apply? A- Concealment of Smoking B- No Insurable Interest C- Intent to Murder D- Impersonation of the applicant by another person
A- Concealment of Smoking B- No Insurable Interest C- Intent to Murder D- Impersonation of the applicant by another person. ANSWER- A
A group life insurance policy terminates a class of participants. To qualify for an individual policy, an employee must do which of the following? A- Have been insured for at least 5 years B- Pay at least 2 premiums in advance C- Prove that he is insurable D- Apply for the new policy immediately
ANSWER- A
All of the following statements about life insurance policy proceeds are correct EXCEPT A- Insurers may deduct any unpaid premiums due from the proceeds B- Insurers may deduct the principal and interest of any policy loan that is due from the proceeds C- Insurers may assign the proceeds to the insureds creditors D- Insurers can keep the proceeds from the claims of the insureds creditors.
ANSWER-C
Which of the following statements about Lloyds of London is NOT correct? A- It helps associates settle claims and disputes B- It gathers underwriting information C- It is an insurance carrier that underwrites insurance D- It is an association of individuals and companies that underwrite insurance.
ANSWER-C
Which of the following statements about the AR life and disability insurance guaranty association is CORRECT? A- It covers group policies issued by employers, associations, or other entities. B-Only domestic insurers must be members of the association C- Its ability cannot exceed $300,000 for life insurance death benefits, OR disability benefits D- Its main purpose is to help domestic insurers rather than foreign or alien insurers that become insolvent
ANSWER-C
Which of the following statements regarding a traditional individual IRA is not correct? A- IRA are available to anyone with earned income, but deductible contributions are limited for individuals who are also covered under an employer sponsored retirement plan. B- Assuming that only tax deductible contributions were made into the IRA, 100% of distributions from it are treated as taxable. C- A 10% penalty is assessed on any distributions from an IRA before age 59.5
ANSWER-C
All of the following are basic premium factors EXCEPT A- The mortality Rate B- Interest Rate C- The insurers expenses D- The insured's annual income
ANSWER-D
Which of the following types of agent authority is specifically set forth in writing in the agent's contract?
Express
Winnie is insured under a life insurance policy. She designates "all natural children of the insured" as beneficiaries in her policy. Which of the following phrases best describes this type of designation?
Generational Beneficiaries
