Missed Life Insurance Exam Review Questions
What does "liquidity" refer to in a life insurance policy?
Cash values can be borrowed at any time
A failure to report insurance fraud to the commissioner is considered a/an___
Class A Misdemeanor
What entity ultimately determines if an advertisement is deceptive or confusing?
Commissioner
What is another name for interest-sensitive whole life insurance?
Current assumption life
What does the Life and Disability Insurance Guaranty Association guard against?
Insurer Insolvency
Who makes up the Medical Information Bureau?
Insurers
What is misrepresentation?
Issuing, publishing, or circulating any illustration or sales material that is false, misleading, or deceptive
What is the official name for the Social Security Program?
Old Age Survivors Disability Insurance
Which entity keeps a file of all of an insurers advertisements?
The insurer
A producer moves to another state and terminates their residency in Arkansas. The Arkansas producers license must be returned to the Commissioner within how many days?
10 days
What is the maximum period for a temporary license in this state?
180 days
How long is the licensing period in Arkansas?
2 years
When a producer changes address of their residence, the Insurance Department must be notified within
30 days
To attain currently insured status under Social Security, a worker must have earned at least how many credits during the last 13 quarters?
6 credits
A paid-up nonforfeiture benefit will become effective as specified in the policy, unless the person entitled elects another available option within how many days after the due date of the premium in default?
60 days
When handling premium funds, insurance producers are acting in a __
Fiduciary capacity
If a policy allows the policyowner to make periodic adjustments to the face amount at standard rates, without proving insurability, the policy includes a ___?
Guaranteed Insurability Rider
What is an eligibility requirement for all social security disability income benefits
Have attained fully insured status
A policy will pay the death benefit if the insured dies during the 20-year premium paying period, and nothing if he dies after it. What type of policy is this?
Level Term
What settlement option in life insurance is known as Straight Life
Life Income
Which life insurance settlement option guarantees payments for the lifetime of the recipient, but, also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary?
Life income with period certain
On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. What is the company guilty of?
Misrepresentation
A participating insurance policy may?
Pay dividends to the policyowner
Who is protected from financial loss by the Life and Disability Insurance Guaranty Association?
Policyholders
The purpose of insurance regulation is to
Promote the public welfare
The paid-up addition option uses the dividend to..
Purchase a smaller amount of the same type of insurance as the original policy
When replacement is involved, a producer doesn't have to
Receive a confirmation from the existing insurer
To what organization must all admitted insurers belong?
The life and disability insurance guaranty association
What is the main justification for the existence of the State Insurance Department?
To protect the public
If, after a hearing, the Commissioner finds that a producer has committed any insurance unfair trade practice, the Commissioner may revoke or refuse to renew the producer's license, place the licensee on probationary status, or suspend a licensee for up to
36 months
What is the maximum fine for violating the commissioners cease and desist order?
$10,000
An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one to the other, and what is the tax consequence of a direct transfer?
$10,000, no tax consequence
An individual purchases a $100,000 Joint Life policy on himself and his wife. 8 years later, he dies in a car accident. How much will his wife receive from the policy?
$100,000
What is the maximum fine for a single violation of the Insurance Code if a person knew or should have known that an act would result in a violation?
$5,000
An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy?
$50,000
What is the number of credits required for fully insured status for social security disability benefits?
40
Concerning insurance, the definition of a fiduciary is
A producer/broker who handles insurer funds in a trust capacity
If an insurance producers or consultants license has lapsed,
A reinstatement fee is double the renewal fee
The two types of assignments are
Absolute and Collateral
What is another term for an authorized insurer?
Admitted
In order to get a nonresident license in Arkansas, producers must what?
Apply and pay a fee to a nonresident state that reciprocates
An insurer that holds a Certificate of Authority in the state of which it transacts its business is considered a/an?
Authorized insurer
Who assumes control over an insurance company's funds and management if they become insolvent?
Department of Insurance
What would not be considered a rebate if offered to an insured in the sale of insurance?
Dividends from a mutual insurer
When the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount?
Equal to the original policy for as long as the cash values will purchase
What best describes the aleatory nature of an insurance contract?
Exchange of unequal values
A person takes out a loan in order to pay off his house. He dies several years later, having paid off only a portion of the debt. What happens?
If the lender has credit insurance, this amount will be paid to the lender
An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. This practice is?
Illegal
What type of insurance would be used for a Return of Premium rider?
Increasing Term
According to agency law, the producer always represents the
Insurance company
What is churning?
Replacing insurance policies for the sole purpose of earning commission
What would help prevent a universal life policy from lapsing?
Target Premium
A 60-year old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. What happens?
The amount of the distribution is reduced by the amount of a 20% withholding tax
Who typically pays for creditor insurance?
The borrower
Which entity ultimately determines if an advertisement is deceptive or confusing?
The commissioner
In credit life insurance, who is the beneficiary?
The creditor
Whos is the policyowner on Credit Life insurance?
The creditor
What benefit option is NOT available under Social Security?
Welfare benefits
When does Arkansas NOT provide a temporary license?
When a producer retires
When would a 20-[ay whole life policy endow?
When the insured reaches age 100
When an insured terminates membership in the insured group, the insured can convert to
Whole life without proof of insurability
Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid..
For 20 years or until death, whichever occurs first
How long must an insurer's advertisement be kept on file?
For 4 years or until the company's next regular examination, whichever comes later
What is NOT necessary for becoming a nonresident producer in this state?
Passing the licensing examination
A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will ____
Pay the policy proceeds ONLY if it would have issued the policy
How must a replacing producer respond to an applicant wishing to replace existing life insurance?
The producer must provide the applicant with a Notice Regarding Replacement
Insurers must annually pay the divisible surplus, if any, that will accrue to the policyholders on the policy anniversary date. This must occur no later than the end of the
Third policy year
In insurance, an offer is usually made when____
An applicant submits an application to the insurer
An applicant is denied insurance because of info found on a consumer report. What requires that the insurance company supply the applicant with the name and address of the consumer reporting company?
Fair Credit Reporting Act
What entity is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization?
Fraternal Benefit Society
What happens during the accumulation period of an annuity?
It is a period of time during which the payments into the annuity grow tax deferred
What is NOT considered a misrepresentation as it pertains to unfair trade practices?
Making comparisons between different policies
What is a definition of a Unilateral contract
One-sided: only one party makes an enforceable promise
In the replacement of a policy, who notifies the existing insurer that a policy is being replaced?
The replacing company