Minnesota Pre Licensing Exam Prep
Insurance policies are considered aleatory contracts because they are "take it or leave it" contracts both parties consent to the contract performance is conditioned upon a future occurrence the contract is voidable upon proof or fraud
performance is conditioned upon a future occurrence
Who elects the governing body of a mutual insurance company? chairman of the board bondholders stockholders policyholders
policyholders
The ______ is authorized to assign a Life Insurance policy as collateral for a loan. beneficiary insured policyowner lender
policyowner
Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called representations consideration warranties guarantees
representations
A level premium indicates: the premium is fixed for a period stated in the contract, then becomes variable the premium can only be changed with the consent of the insurer the premium stays level until the policy's renewal date the premium is fixed for the entire duration of the contract
the premium is fixed for the entire duration of the contract
The advantage of reinstating an original life policy is the premiums are based on the current age of the insured the premiums are based on a younger age the interest charged on policy loans will be lowered a new incontestible period will begin
the premiums are based on a younger age
K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary? Return of premium paid Cash value plus interest $20,000 death benefit Face amount plus interest
$20,000 death benefit
The standard grace period for premium payments on all individual life insurance policies issued in Minnesota is __ months 1 2 3 4
1
All individual life insurance policies sold in Minnesota MUST have a grace period of 10 days 14 days 1 month 3 months
1 month
Within how many days must a licensee notify the Commissioner of Commerce of a change in address or legal name? 10 20 30 45
10
An insurer must send a notice of appointment for a producer within ___ days from the date of an executed agency contract or after submitting the first application to the insurer. 10 15 20 25
15
How many days is a temporary producer's license valid? 10 30 60 180
180
At what point may a producer sell prodcuts for an insurance company? After becoming bonded with the state After passing the state exam After being appointed by the insurer After meeting the insurer's production requirements
After being appointed by the insurer
What does the insuring agreement in a Life insurance contract establish? An insurer's basic promise The insurance policy's grace period An insurer's required reserve amount The obligations of the beneficiary
An insurer's basic promise
An example of Life insurance policy replacement would be which of the following? Cash surrender an existing whole life policy Canceling an existing life policy and purchasing a disablity policy Converting existing term life coverage to an individual whole life policy Cash surrender an existing life policy and purchasing a new life policy
Cash surrender an existing life policy and purchasing a new life policy
A policy loan is made possible by which of these life insurance policy features? Extended term provision Cash value provision Owner's rights provision Consideration clause
Cash value provision
A policy loan is made possible by which of these life insurance policy features? Extended term provision Cash value provision Owner's Rights provisions Consideration clause
Cash value provisions
Company XYZ offers a group Term Life insurance plan to its employees. What does each employee covered under this plan recieve? Master policy Receipt of coverage Individual policy Certificate of insurance
Certificate of Insurance
A company that owns a life insurance policy on one of its key employees may do all of the following EXCEPT Borrow against cash value Change beneficiary Cancel policy Change the policy's interest rate
Change the policy's interest rate
A Key Employee policy is taken out by Company X on its vice president. Ten years later, this employee leaves Company X and begins working for Company Y. If this individual were to die and the policy is still in force and unchanged, where would the death proceeds be directed? The employee's family Company Y Company X The employee's estate
Company X
What group term life feature permits an individual to depart from the group and continue to be covered without providing evidence of insurability? Entire contact Owner's rights Nonforfeiture options Conversion
Conversion
Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it? Modified Whole Life 20-Pay Life Decreasing Term Endowment
Decreasing Term
F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed? Level term policy Whole life policy Limited-pay policy Decreasing term policy
Decreasing term policy
P, age 50, purchased an annuity that P will fund with $500/ month for 15 years. The annuity will then pay P retirement payments after the 15 years. Which type of annuity did P purchase? Immediate Retroactive Deferred Universal
Deferred
Company Z has a Cross Purchase Buy-Sell Agreement in place among its three founding partners. If the agreement is funded with individual life insurance, what would it require? One policy is owned and paid for by the company Each partner must own a policy on the other partners One policy is owned by the company and premiums are split equally among the partners Each partner owns their own individual policy
Each partner must own a policy on the other partners
S, while in the process of converting her group life insurance to an individual policy, dies. What happens to the claim her beneficiary submits? No benefits are payable under the Master contract Full benefits are payable under the Master contract Full benefits are payable under the converted policy Benefits less required premium are payable under the converted policy
Full benefits are payable under the Master contract
Which requirement must be met for an association to be eligible for a group life plan? Group was formed for a purpose other than acquiring insurance Group must establish a President Group must have at least 10 members Group was formed for the purpose of acquiring insurance
Group was formed for a purpose other than acquiring insurance
The type of annuity that can be purchased with one monetary deposit is called a Single Deposit annuity Single Premium annuity Fixed annuity Immediate annuity
Immediate annuity
How are policyowner dividends treated in regards to income tax? Dividends are not taxable Interest on accumulations is taxed Taxed as ordinary income Taxed as capital gains
Interest on accumulations is taxed
Which type of life insurance beneficiary requires his/her consent when a change of beneficiary is attempted by the policyowner? Irrevocable beneficiary Tertiary beneficiary Primary beneficiary Revocable beneificiary
Irrevocable beneficiary
K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable? Increasing Decreasing Adjustable Level
Level
Which of these are NOT an example of a Nonforfeiture option? Extended Term Reduced Paid-up Cash Surrender Life Income
Life Income
Which settlement option pays a stated amount of an annuitant, but no residual value to a beneficiary? Interst Only Fixed Period Fixed Amount Life Income
Life Income
A whole life insurance policyowner does not wish to continue making premium payments. Which of the following enables the policyowner to sell the policy for more than its cash value? Cash surrender Life settlement contract Buy-sell arrangement 1031 Exchange
Life settlement contract
Which of these factors do NOT play a role in the underwriting of a life insurance policy? Avocations Credit status Martial status Occupation
Martial status
_______ can be defined as "making an unfair comparison of two insurance policies" Rabating Twisting Coercion Misrepresentation
Misrepresentation
Which of these life products is NOT considered interest-sensitive? Modified Whole Life Variable Universal Life Interest Sensitive Whole Life Variable Life
Modified Whole Life
Which of these is NOT an element of Life insurance premiums? Mortality rate Insurer's expenses Interest credit Morbidity rate
Morbidity rate
Which of the following is TRUE about a qualified retirement that is "top heavy"? More than 30% of plan assets are key employee accounts More than 40% of annual additions are for key employee accounts More than 50% of plan assets are in key employee accounts More than 60% of plan assets are in key employee accounts
More than 60% of plan assets are in key employee accounts
Which of the following statements is CORRECT about accelerated death benefits? The full face amount is available as an accelerated benefit Those on Social Security disability automatically qualify for this benefit This provision is usually provided with an increase in premium Must have a termial illness to qualify
Must have a terminal illness to qualify
If a corporation pays the premium on a group life policy for its employees, the corporation is required to report how much additional taxable income for each employee? The annual premium divided by the number of employees The entire premium paid in a year Half the premium paid in a year Nothing
Nothing
In a life insurance policy, which provision states who select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy? Nonforfeiture Entire Contract Insuring Clause Owner's Rights
Owner's Rights
On a life insurance policy, who is qualified to change the beneficiary designation? Payor Primary beneficiary Policyowner Insurer
Policyowner
Y purchased $100,000 worth of permanent protection on himself and $50,000 worth of 10-year Term coverage for his wife on the same policy. Which of these policies did Y purchase? Endowment with Extended Term Endowment with a Payor Benefit Whole Life Policy with an Other Insured Rider Family Income policy
Whole Life policy with an Other insured Rider
A Term Life rider offers the insured additional life coverage cash value long-term coverage disability protection
additional life coverage
To be eligible for Social Security disability benefits, an employee must be unable to perform: any occupation his/her current occupation any occupation that reflects the employee's education level any occupation that the employee is qualified and willing to do
any occupation
T is the policyowner for a Life Insurance policy with an Irrevocable beneficiary designation. If T wishes to change the beneficiary, T must obtain permission from the payor agent beneficiary Commissioner of Insurance
beneficiary
T is the policyowner for a Life Insurance policy with an Irrevocable beneficiary designation. If T wishes to change the beneficiary, T must obtain permission from the payor agent beneficiary Commissioner of Insurance
beneficiary
A policyowner is in the process of replacing an existing individual life insurance policy with another. The "Notice Regarding Replacement" must be signed by only the producer only the applicant both the applicant and the producer both the beneficiary and the underwriter
both the applicant and the producer
What is the purpose of the U.S.A Patriot Act? detect and deter fraud detect and deter alien insurance companies detect and deter terrorism detect and deter misrepresentations
detect and deter terrorism
All of these are characteristics of an Adjustable Life policy EXCEPT adjustable premiums adjustable premium payment period combination of term and whole life insurance face amount can be adjusted using policy dividends
face amount can be adjusted using policy dividends
An example of an unfair claims practice would be requesting a third-party arbitrator to resolve a disagreement failing to effectuate prompt, fair, and equitable settlements of a claim paying a cliam promptly after recieving proof of loss requiring the insured to give a statement under oath
failing to effectuate prompt, fair, and equitable settlements of a claim
What kind of premium does a Whole Life policy have? decreasing adjustable level deferred
level
An employer that offers a qualified retirement plan to its employees is eligible to avoid ERISA regulations make tax-deductible contributions to the plan make tax-deductible contributions to key employees only make partial tax-deductible contributions to the plan
make tax-deductible contributions to the plan
Defamation occurs when a producer makes a false statement intended to malign another insurer replace an existing insurance policy with another restrict fair trade misrepresent the provisions of an insurance policy
malign another insurer
Convincing a prospective insured to buy an insurance policy based on exaggerations is called rebating intimidation twisting misrepresentation
misrepresentation
N, age 50, recently bought an annuity that will pay a guaranteed $2,000/month at age 70 for life. What type of annuity did N purchase? Fixed Period Fixe Deferred Fixed Immediate Fixed Variable
Fixed Deferred
What action should a producer take if the initial premium is NOT submitted with the application? Keep the application until premium is paid Forward the application to the insurer after giving the applicant a binding receipt Forward the application to the insurer without the initial premium Forward the application to the insurer after giving the applicant a conditional receipt
Forward the application to the insurer without the inital premium
How is the Minnesota Life and Health Insurance Guaranty Associated funded? From producers of member companies From the state government From the federal government From member companies
From member companies
The Commissioner of Commerce is appointed by the ____ Governor Attorney General State Senate NAIC
Governor
Information obtained from a phone conversation to the proposed insured can be found in which of these reports? Agent's report MIB report Inspection report Attending physician's report
Inspection report
If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of? Insurer Beneficiary Reinsurer Insured
Insured
Who has the option to renew a Renewable Term policy? Agency Agent Insured Beneficiary
Insured
If the insured and primary beneficiary are both killed in the same accident and it cannot be determined who died first, where are the death proceeds to be directed under the Uniform Simultaneous Death Act? Primary beneficiary's estate Primary beneficiary's next of kin Insured's estate Insured's contingent beneficiary
Insured's contingent beneficiary
The Accelerated Death Benefit provision in a life insurance policy is also known as a(n): 1035 exchange Inter vivos gift Non-forteiture option Living Benefit
Living Benefit
What does a 401(k) plan generally provide its participants? Tax-free distributions Salary-deferral distributions Salary-deferral contributions A defined retirement benefit
Salary-deferral contributions
Which of these factors does NOT influence an applicant's need for life insurance? Lifestyle of the applicant Number of dependents Future educational costs of the dependents Self-maintenance expenses
Self-maintenance expenses
P is a producer who notices 5 questions on a life application were not answered. What actions should P take? Mail incomplete application to applicant to be completed and returned to the agent Submit the application as-is to the insurer Call the applicant and complete application over the phone Set up a meeting with the applicant to answer the remaining questions
Set up meeting with the applicant to answer the remaining questions
Which of the following is NOT considered rebating? Sharing commissions with a producer licensed in the same line of business Returning premium to a client as an inducement for purchasing a policy Giving something of value to an insured in exchange for their business Offering special dividends
Sharing commissions with a producer licensed in the same life of business
Q is looking to buy a life insurance policy that will provide the greatest amount of protection for a temporary time period. Which of these policies should Q purchase? Term life Straight life Endowment Annuity
Term life
What kind of life insurance product covers children under their parent's policy? Family Maintenance rider Term rider Family Income rider Payor benefit
Term rider
What kind of life insurance product covers children under their parent's policy? Family Maintenance rider Term rider Family income rider Payor benefit
Term rider
Which statement regarding a Key Employee Life policy is NOT true? The application must be signed by the key employee its purpose is to prevent the financial loss that may ensue if a key employee dies The beneficiary is named by the key employee The company purchases, owns, pays the premiums and is the beneficiary
The beneificiary is named by the key employee
S buys a $50,000 whole life policy with a $50,000 Accidental Death and Dismemberment rider. S dies 1 year later of natural causes. How much will the insurer pay the beneficiary? $100,000 $50,000 Refund of premiums paid plus interest No claims will be paid because cause of death was from natural causes
$50,000
Within how many days must a licensee notify the Commissioner of Commerce of a change in address? 10 15 20 30
10
Which of the following types of Term Life policies most likely contains a Renewability feature? Increasing Term 10 year Convertible Term Decreasing Term Variable Term
10 Year Convertible Term
Which of these is NOT a reason for a business to buy key person life insurance? The reduction is sales as a direct result from death of the key employee A void in leadership if the key person were to die The loss of compnay revenues while a replacement is being sought A pension deficiency if the key employee dies
A pension deficiency if the key employee dies
Before a life policy is issued, which of these contract elements is necessary? A signed application by the prospect A minimum amount of coverage A beneficiary's signature on an application A binding receipt
A signed application by the prospect
What is a definition of Life insurance replacement? A transaction in which coverage on an existing policy is increased A transaction in which group life coverage is converted to an individual policy A transaction in which a new policy is brought and an old policy is terminated A transaction in which a policyowner reinstates a lapsed policy
A transaction in which a new policy is brought and an old policy is terminated
Which of the following is NOT included in an annuity contract? Nonforfeiture benefit Free-look period Beneficiary AD&D rider
AD&D rider
All are true statements regarding the underwriting process, EXCEPT: Signed consent from the applicant must be provided in order to test for AIDS and HIV virus AIDS and HIV virus exams can be conducted in a discriminatory fashion The cost of any examination is paid for by the insurer The original application is the primary source of information used in the underwriting process
AIDS and HIV virus exams can be conducted in a discriminatory fashion
Insurance policies are offered on a "take it or leave it" basis, which make them: Conditional Contracts Aleatory Contracts Unilateralm Contracts Contracts of Adhesion
Contracts of Adhesion
Which provision allows the policyowner to change a term life policy to a permanant one without providing proof of good health? Modification Conversion Exchange Adjustable
Conversion
Which of the following features of group Term Life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability? Owner's Rights clause Incontestable Period Insuring Agreement Conversion privilege
Conversion privilege
What is the basic function of an annuity? The systematic liquidation of accumulated funds The guarantee of a specific sum of momey to designated beneficiary upon the death of the insured The protection agaisnt loss of income due to partial or total disability The accumulation of funds to pay for life insurance premiums during retirement years
The systematic liquidation of accumulated funds
Why would the Commissioner of Commerce issue a temporary license? To allow a person who failed the state exam to conduct insurance business To allow a nonresident producer to conduct business in Minnesota To allow the personal representative of a decreased producer to provide service to existing policyowners To allow a producer to sell for an unauthorized insurer
To allow the personal representative of a decrease producer to provide service to existing policyowners
Which of these is considered a statement that is assured to be true in every respect? Estoppel Warranty Guarantee Representation
Warranty
The Minnesota Life and Health Insurance Guaranty Association is funded by authorized insurers in this State. One of the roles of this organization is to set rates for the insurer assist in underwriting large polices assist in the prevention of insurer insolvencies provide legal counsel for admitted insurers
assist in the prevention of insurer insolvencies
All individuals covered under a group contract will recieve an certificate receipt of coverage master policy individual policy
certificate
A Whole Life insurance policyowner does NOT have the right to designate a beneficiary take out a policy loan change the grace period assign the policy
change the grance period
One defintion of replacement is "the act of replacing an existing insurance policy with another" Replacement is legal and requires no disclosure closely regulated and requires full disclosure not legal in the state of Minnesota allowed only if the policy originated outside the state of Minnesota
closely regulated and requires full disclosure
Insurance contracts are known as ____ because certain future conditions or acts must occur before any claims can be paid. consideration unilateral aleatory conditional
conditional
In a individual retirement account (IRA), rollover contribution are: subject to capital gains tax subject to ordinary income tax partially limited by dollar amount not limited by dollar amount
not limited by dollar amount
Consumer reports requested by an underwriter during the application process of a life insurance policy can be used to determine: driving history probability of making timely premium payments if applicant is a tobacco user overall health of the applicant
probablity of making timely premium payments
An individual who has a contract with an insurance company to represent it is called a representative producer director administrator
producer
An individual who has a contract with an insurance company to represent it is called a(n) representative producer director administrator
producer
Typically a life insurance death benefit is paid by a lump-sum payment. A(n) _______ option is a method of distrubuting a Life Insurance policy's death benefit OTHER than by a lump sum payment. settlement dividend conversion aleatory
settlement
A contract owner terminates an annuity before the income payment period begins. The owner will then receive half of the current surrender value the current contract surrender value the premium paid to date nothing
the current contact surrender value
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct? Straight life accumulates faster than Limited-pay Life 20-Pay Life accumulates cash value faster than Straight Life Cash value accumulation of both 20-Pay Life and Straight Life depend on the insurer's financial rating 20-Pay Life and Straight Life accumulate cash value at the same rate
20-Pay Life accumulates cash value faster than Straight LIfe
The USA Patriat Act was enacted in: 2001 2002 2003 2004
2001
Minnesota requires that an insurance producer must complete ___ hours of continuing education on the subject of law and ethics every reporting period. 0 1 2 3
3
Q is severely injured in an automobile accident and becomes totally disabled. How many months must Q be disabled before being able to apply for Social Security disability benefits? 3 4 5 6
5
One becomes eligible for Social Security disability benefits after having been disabled for 3 months 5 months 6 months 12 months
5 months
Backdating a life insurance application for coverage is allowed if the policy application was not backdated more than ___ months 4 5 6 7
6
Which statement is TRUE regarding a Variable Whole Life policy? A minimum guaranteed Death benefit is provided It is a combination of an Endowment and a Increasing Term policy Its premium and benefits are variable It has guaranteed dividends
A minimum guaranteed Death benefit is provided
Which statement is correct regarding the premium payment schedule for whole life policies? Premiums are payable throughout the insured's lifetime/ coverage lasts until death of the insured Premiums are payable for a set period/ coverage expires at that point Premiums are payable until age 65/ coverage lasts a lifetime A single premium is paid at time of application/ coverage lasts until retirement
Premiums are payable throughout the insured's lifetime/ coverage lasts until death of the insured
A producer charged an insurance applicant an administration fee. At what point must the producer give a written disclosure for this fee? Prior to any services being rendered Within 20 days after delivery of the policy Within 45 days after delivery of the policy Prior to the sales appointment
Prior to any services being rendered
A primary beneficiary has died before the insured in a life insurance policy. A contingent beneficiary is also named in the policy. Which of the following will occur when the insured dies? Proceeds will go to the primary beneficiary's estate Probate will decide who receives proceeds Proceeds will go to the contingent beneficiary Proceeds will go to the insured's estate
Proceeds will go to the contingent beneficiary
Who signs a "Notice Regarding Replacement" form when an application is taken for a new life insurance policy that replaces an existing one? Producer only Applicant only Producer and applicant Beneficiary
Producer and applicant
T and S are named co-primary beneficiaries on a $500,000 Accidental Death and Dismemberment policy insuring their father. Their mother was named contingent beneficiary. Five years later, S dies of natural causes and the father is killed in a scuba accident shortly afterwards. How much of the death benefit will the mother receive? $1,000,000 $500,000 $250,000 $0
$0
All of the following are examples of insurance advertisement EXCEPT A direct mail brochure announcing specific insurance plans A newspaper notice annoucning free insurance advice A television spot announcing an insurance company's new product An employer newsletter announcing the availability of coverage for employees
An employer newsletter announcing the availablity of coverage for employees
When can a policyowner change a revocable beneficiary? Anytime After the consent of the current beneficiary Never Only if primary beneficiary dies
Anytime
_______ is the authority given to a producer to transact business on behalf of the insurer. Admission Appointment Adjustment Authorization
Appointment
Traditional individual retirement annuity (IRA) distributions must start by: age 59 1/2 age 65 April 1st of the year following the year the participant attains age 59 1/2 April 1st of the year following the year the participant attains age 70 1/2
April 1st of the year following the year the participant attains age 70 1/2
What action can a policyowner take if an application for a bank loan requires collateral? Utilize accelerated benefits provision Borrow against policy cash value and use as a down payment Assign policy ownership to the bank Name bank as beneficiary
Assign policy ownership to the bank
S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made? Automatic Policy Loan Assignment Grace Period Waiver of Premium
Automatic Policy Loan
Who is NOT required to sign a life insurance application? Adult insured Policyowner Agent Beneficiary
Beneficiary
Two partners own equal shares in a business worth a total of $1,000,000. If they both commit to the purchase of a life insurance policy that will fund a Buy-Sell Agreement, which of the following is TRUE? Each partner owns a $1,000,000 policy on their own life Each partner owns a $1,000,000 policy on their partner's life Each partner owns a $500,000 policy on their own life Each partner owns a $500,000 policy on their partner's life
Each partner owns a $500,000 policy on their partner's life
When an individual is planning to protect his family with life insurance, one method of doing so is called needs analysis. What exactly does needs analysis involve? Establishes the needs of the individual and his dependents Takes into account the present value of future income earned by the breadwinner Places a dollar value on the life of the individual Establishes the investment risk level acceptable to the individual
Establishes the needs of the individual and his dependents
Term insurance has which of the following characteristics? Expires at the end of the policy period Builds cash value Has nonforfeiture options Endows at the end of the policy period
Expires at the end of the policy period
Which of the following would be a valid reason for the Commissioner of Commerce to deny an insurance license? Conviction of a misdemeanor Residing in another state within past 10 years Declaring bankruptcy in last 7 years Failing to report a felony
Failing to report a felony
When must insurable interest exist for a life insurance contract to be valid? Inception of the contract Throughout the entire length of the contract When the insured dies During the contestable period
Inception of the contract
A 55 year old recently received a $30,000 distribution from a previous employer's 401k plan, minus $6,000 withholding. Which federal taxes apply if none of the funds were rolled over? Only income taxes on $30,000 Only income taxes on $24,000 Income taxes plus a 10% penalty tax on $30,000 Income taxes plus a 10% penalty tax on $24,000
Income taxes plus a 10% penalty tax on $30,000
During an insurance transaction, who does the producer represent? Insurer Insured Commissioner of Commerce Producer
Insurer
Variable annuities may invest premiums in each of the following, EXCEPT: Common Stock Money Market securities Insurer's corporate business account Junk bonds
Insurer's corpate business account
Which of the following provisions guarantees that premiums will be waived if a Juvenville Life policyowner becomes disabled? Family Maintenance clause Payor clause Assignment provision Automatic Premium Loan provision
Payor clause
When an employee is terminated, which statement about a group term life conversion is true? Employee must convert group term life coverage into an individual term life policy Employee must provide evidence of insurability for conversion Policy proceeds will be paid if the employee dies during the conversion period Policy proceeds will NOT be paid if the employee dies during the conversion period
Policy proceeds will be paid if the employee dies during the conversion period
Replacement regulation is intended to protect the interests of the Producer Policyowner Insurer Beneficiary
Policyowner
Which is true concerning a Variable Universal Life policy? Policyowner controls where the investment will go and selects the amount of the premium payment Policyowner has no say where the investment will go but can choose the premium mode The investment vehicle for this type of policy is held in the insurer's general portfolio The death benefit can vary but the policyowner has not say in the premium amount paid
Policyowner controls where the investment will go and selects the amount of the premium payment
A policyowner is able to choose the frequency of premium payments through the policy feature? Consideration Payor benefit Premium Mode Asssignment provision
Premium Mode
Which of the following is NOT a valid reason for the Commissioner of Commerce to suspend or revoke a producer's license? Producer returns part of a commission to a client in exchange for a sale Producer represents more than one insurance company Producer engages in false advertising Producer commingles premiums collected with a personal account
Producer represents more than one insurance company
T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this? Renewable Increasing Level Decreasing
Renewable
Which type of plan allows an employer to give money to an employee for buying a life insurance policy and also permits the employee to select the beneficiary? Split-dollar plan Employer purchase plan Key employee plan Deferred compensation plan
Split-dollar plan
What type of life policy covers two people and pays upon the death of the last insured? Shared Survivorship Adjustable Joint
Survivorship
Which of the following statements about accumulated interest earned on dividends from an insurance policy is TRUE? Partially taxable Tax deductible Nontaxable Taxed as ordinary income
Taxed as ordinary income
What type of life insurance are credit policies issued as? Whole Variable Term Universal
Term
C is trying to determine whether to convert her convertible term life policy to whole life insurance using her original age or attained age. What factor would affect her decision the most? The cost The nonforfeiture options The contestable period The assignment of ownership
The cost
What is the underlying concept regarding level premiums? Level premiums build cash value quicker in the early years The early years are charged more than what is needed The early years are charged less than what is needed Level premiums can only be paid annually
The early years are changed more than what is needed
Who is normally considered to be the owner of a 403(b) tax-sheltered annuity? The 403(b) custodian The financial institution The employer The employee
The employee
Which statement regarding the Change of Beneficiary provision is true? The beneficiary can only be changed with the consent of the insurer The policyowner can change the beneficiary The insured can change the beneficiary A beneficiary change is subject to underwriting procedures
The policyowner can change the beneficiary
Why would the Commissioner of Commerce issue a temporary license? To allow a person who failed the state exam to conduct insurance business To allow a nonresident producer to conduct business in Minnesota To allow the personal representative of a decreased producer to provide service to existing policyowners To allow a producer to sell for an unauthorized insurer
To allow the personal representative of a decreased producer to provide service to existing policyowners
Why would the Commissioner of Commerne examiine the records of an insurance company? To determine the solvency of the company To set insurance rates for the company To assist in underwriting To assess the company's value
To determine the solvency of the company
J is a producer who has induced an insured through misrepresentation to surrender an existing insurance policy. What is J guilty of? Coercion Sliding Twisting Rebating
Twisting
K purchased a Life insurance policy in 1986 which paid 10% interest in the early years of the policy. Twenty years after the purchase, she received a notice from the insurer stating that the policy will soon terminate unless a much-higher premium is paid because of falling interest rates. This type of policy is known as a(n) _________ life policy. Whole Universal Graded Increasing
Universal
What type of life insurance incorporates flexible premiums and an adjustable death benefit? Endowment Policy Modified Whole Life Decreasing Term Univeral Life
Universal Life
A(n) _____ Life policy offers the owner investment in products such as money-market funds, long-term bonds and equities Adjustable Term Universal Variable
Variable
A(n) ______ annuity pays benefits based on units rather than stated dollar amounts. Deferred Variable Immediate Unit
Variable
A life policy with a death benefit and cash value that can fluctuate according to the performance of its underlying investment portfolio is referred to as Adjustable Life Graded-Premium Life Variable Life Modified Whole Life
Variable Life
Which type of life policy contains a monthly mortality charge as well as self-directed investment choices? Joint Life Adjustable Life Variable Universal Life Univeral Life
Variable Universal Life
S owns a life insurance policy with cash values that fluctuate according to the underlying investment performance of common stocks. Which of these policies does S own? Endowment Variable Term Life Variable Whole Life Joint Life
Variable Whole Life
A nonprofit incorporated society that does not have capital stock and operates for the sole benefits of its members is known as: a fraternal benefit society a stock insurer a mutual insurer the Life and Health Insurance Guaranty Association
a fraternal benefit society
An underwriter determines that a life insurance applicant's risk should be reclassified due to a health issue. This policy may be issued with a extra premium Concealment clause extended Contestable period exclusion for the medical condition
extra premium
A Nonforfeiture clause gives the policyowner lifetime income guaranteed values even if the policy has lapsed unemployment benefits cost of living allowances
guaranteed values even if the policy has lapsed
When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have: all statements by warranties insurable interst in the proposed insured the agent complete a third-party application all those involved be family-related
insurable interest in the proposed insured
A stock insurance comany is owned exclusively by its policyowners guarantees dividends to its shareholders elects a governing body by its policyowners is owned exclusively by its shareholders
is owned exclusively by its shareholders
Credit Life insurance is issued in any amount at the discretion of the applicant used in the event of loss of income issued in an amount not to exceed the amount of indebtedness coverage that waives the premiums on a loan payment in the event of total disability
issued in an amount not to exceed the amount of indebtedness
A group-owned insurance company that is formed to assume and spread the liabilty risks of its members is known as a: treaty insurer risk retention group risk assumption group captive insurer
risk retention group
Under a Renewable Term policy the face amount is automatically adjusted at the time of renewal evidence of insurability must be provided at each renewal the renewal premium is calculated on the basis of the insured's attained age a new application must be completed at each renewal
the renewal premium is calculated on the basis of the insured's attained age
The Common Disaster clause provides that if both the insured and the sole named beneficiary were to die in a common accident, which of the following is true? This clause provides the payment of proceeds to the insured's estate This clause provides the payment of proceeds to the beneficiary's estate The estate taxes in the insured's estate may be reduced The estate taxes in the beneficiary's estate may be reduced
this clause provides the payment of the proceeds to the insured's estate
The free-look provision begins upon the date of the sales presentation upon receipt of the policy by the producer upon receipt of the policy by the policyowner upon the completion of the application
upon receipt of the policy by the policyowner
A term life insurance policy matures: upon endowment of the contract upon death of the insured when the cash value equals the death benefit upon the insured's death during the term of the policy
upon the insured's death during the term of the policy
A policy that becomes a Modified Endowment Contract (MEC): will no longer allow for policy loans must be placed in an irrevocable trust can never be reinstated after a lapse will lose many of its tax advantages
will lose many of its tax advantages
