Practice Exam 4

settlement options provide a number of choices relating to how death benefits can be paid by the insurer. these choices:

all 3 1. can be made by the policy owner at the time of submission of the application 2. can be changed by the policy at any time before benefits are paid 3. can be made by the beneficiary if, at the time of death of the insured, no option was established

bill has 2 jobs, if he applies for insurance, how does the insurer classify him?

based on the job with higher hazard

this statement is incorrect about insurance applications:

before the issuer can issue the policy, the beneficiary must acknowledge any changes by providing his/her initial

when applying for insurance, theres usually the owner of the contract, the insured and the applicant. they may be

both 1 and 2

what payments from an insurance policy are not subject to federal income taxes?

death benefits paid to a beneficiary in a lump sum

when premiums are paid into a universal life insurance policy, insurers must make certain adjustments to the cash value. the company will add the current premium paid, and:

deduct for expenses and mortality costs, then add current interest

oscat has been paing into whole life for years. he likes to continue the insurance and is able to afford the premium, but needs 30% of the cash for a few years. whats the best course of action?

continue making premium payments to keep the contract and borrow from cash value

what type of supplementary benefit rider can be used by the insured to offset the effects of inflation?

cost of living rider

policy riders most frequently found in life policies :

d) all of above ad&d>waiver of premium>cost of living

description of a term policy?

each year the premium increases as the insured grows older. after several years the coverage and premiums end simultaneously. cash value is not created.

frank is eligible and wants to participate in the group life, to get this coverage w/o evidence. he must?

enroll for insurance during the eligibility period

true or false a family life insurance policy that provides coverage for children may be converted to permanent insurance for the children, but evidence of insurability is required

false

jennifer wants to receive payments from her tax deferred annuity. her agent suggests she take the money by means of the "life income with 10 years certain" option, when she does, the insurer will make payments,

for at least 120 months or the remainder of her life

juan has been named as irrevocable beneficiary in a life policy. he therefore :

has vested rights to the policy proceeds that, unless he gives consent, cannot be affected by the policy owner nor any creditors

what does the incontestable clause of life insurance policy do?

it keeps the insurer from cancelling the policy if, after 2 years, there is a discovery of error, concealment, or misstatement by the policy owner

whats correct about social security system?

its only meant to be a supplement to a person's major income, it only supplies a minimum floor of income

frans employer provides automatic coverage and requires _____ medical information than the independent agent.

less

not an example of dividend options available on whole life policy

life income with period certain

if no other selection is made, which of the following settlement options becomes the default or automatic mode of settlement for the death benefit of a life insurance policy?

lump sum in cash

which of the following is true regarding the government social insurance program known as social security?

majority of workers in the US must pay into the program

what cannot legally be used when determining premium rates for life insurance?

nationality

whats not an unacceptable risk to the underwriting department of an insurance company?

none, all are acceptable risks?

whats correct about the 10 day free look provision in a life insurance policy: 1. a full refund of premium is required if the policy is returned within 10 days of delivery 2. the contract is in force during the 10 day period and any claims must be paid even though the insured returns the contract

option 1

what is an illegal activity in california?

participating in a plan to offer free insurance if a person buys some form of service

charles receives a large inheritance, he uses all of it to buy an annuity that will being paying him monthly payments starting the following month. charles has purchased an _____ annuity?

single premium immediate annuity

what constitutes the "entire contract" in a life insurance policy?

the policy and and a copy of the application when attached

2 people apply for life insurance with same monthly premiums, one buys whole life, the other buys a 10-yr renewable term plan. both are standard risks with no difference in their age or health rating. whats false about this statement?

the whole life policy will pay a higher amount to the beneficiary should the insured die within the 1st 10 years

reason for a person not to buy life insurance?

to cover a buy?sell agreement

why would a business use a key person life insurance policy?

to protect the company from the financial consequences of the death of a VP

true or false an irrevocable beneficiary has certain rights to policy proceeds bot shared by revocable beneficiaries. for example, an irrevocable beneficiary must grant permission for the policy owner to borrow from the cash value

true

true or false? its unfair to discriminate against any one class of individuals in the business of insurance, however, the code does permit the charging of a higher premium if such premiums can be supported by mortality tables segregated by gender (sex)

true

true pr false the master policy owner of a group insurance is responsible for paying the premiums, submitting info about the employees, forwarding the apps to the insurer and maintaining the policy

true

an agent makes a misleading comparison of a policy he is selling in order to convince a prospect to lapse an old insurance policy. this is?

twisting

an annuity which may be used to help fund retirement in a few years maintains a "separate account". the owner purchases "accumulation units". this is called ?

variable annuity

a policy owner makes the last premium payment on his 250k non-par whole life policy today. the owner is 70. when will the cash value reach 250K?

when he reaches 100 yrs old.

beth wants to purchase more life in., she calls you for an opinion, you know she has guaranteed insurability rider on the policy. she can buy more:

without the need to prove insurability on he life at specific ages.

true or false? when the insured of a non-participating paid-up-at-age-65 life insurance policy attains the age of 65, the cash value will equal the face amount?

false

what is regarded as un-ordinary insurance?

group life insurance policy?

on of the provisions commonly found in the life insurance is the "misstatement of age" clause. if the age of the insured is in error but no discovered until much later, the insurance company will:

make an adjustment to the face amount to properly reflect the premiums that have been paid

in life policies, naming beneficiaries is an important part of the app process. whats the best description of a contingent beneficiary?

one with the first right to receive proceeds if there is no surviving primary beneficiary and the insured dies

what type of life policy gives the owner the right to share in the insurer's profits in the form of a dividend?

participating policy

if the owner of a life insurance policy elects to pay an annual premium, she will?

pay less compared to paying every 6 months

in an overall comparison of a savings account abd a tax deferred annuity, where the savings account and the annuity both pay the same interest, on the same principal amount, and for the same period of time, which will generate the highest return on investment dollars?

the annuity will pay more because of its tax deferred qualities

whats true about contributory group life insurance?

the employee will contribute to the premium payments

best description of a reduced paid-up non-forfeiture option?

the insured decides to stop paying premiums on his 100k cash value, he uses the cash to buy a paid up policy of 40k face amount

frequently, juvenile life policies contain a payor rider. this rider states that in the event the payor of premiums is disabled or dies, and the juvenile has yet to reach a specific age:

the premiums will be paid by the insurer until the child reaches the age of 21 or 25

which department handles the selection of risks?

the underwriting unit

whats false about dividends paid from life insurance poilicies: a dividend is treated as?

treated as a return of excess premium paid by the owner and is therefore taxable

TRUE OR FALSE? a binding receipt issued on the sale of life insurance policy becomes effective from the date of the receipt is given no matter what the insurability of the applicant.

true

true or false an additional amount of premium used to pay for an accidental death benefit provision does not increase the cash value of the policy

true

true or false? decreasing term is frequently used to pay the unpaid balance of a mortgage upon death of the mortgage holder.

true

the dividends and cash value continue, and all features of the policy remain in force, even though the insurance company, no the owner, is making the premiums, this describes a _______ rider?

waiver of premium

when an insured becomes totally and permanently disabled, her condition triggers a provision that keeps the policy in force even though the insured stops making premium payments. this is ???

waiver of premium prevision

patrick puts $100k of after tax money into a tax-deferred annuity, now hes ready to take it out, and the issuer of the annuity says his guaranteed payment is $8k fo the remainder of his life. this means he can expect a total amount of $200K back over his life. how much each years annuity payment is taxable?

$4000

survivorship life or 2nd-to die policies: 1. are effectively used to cover the costs of estate taxes 2. are issued in excess of $1 million in most cases 3. reflect substantially lower premiums when compared to buying 2 separate policies

1 and 2

owner of a non-par whole life policy never misses a payment, never borrows from the policy cash value & finally reaches the age of 100 what cash is this person entitled to in comparison to the face amount?

100% of the cash value which is now the same as the face amount.

variable life insurance policies and variable annuities are primarily governed by which agency?

SEC

the california insurance code contains specific regulations regarding the ability of a senior citizen to return a life insurance policy or annuity. the regualtion:

allows a senior citizen a minimum of 30 days to return a life or annuity contract to the insurer. theyre entitled to a full refund of premium

jerry is using a new time management technique in his insurance sales presentation. in order to cut the amount of time he spends at each appointment, he no longer answers questions when theyre first asked, instead he answers if theyre asked 2x, he feels this will allow him to go to his next meeting quicker. this is considered?

an unethical practice?

employees that have group life policies covering them are required to be issued ?

certificate of insurance

many insurance policies contain a common disaster provision designed to protect:

contingent beneficiaries

a type of contract, which is considered a savings instrument used for accumulating investment funds for the purpose of eventually receiving those through a systematic program of withdrawal is a/an:

an annuity

whats false regarding the taxation of life insurance?

annuity death benefits are totally exempt from taxation?

whats true about tax treatment of life insurance?

death benefits are generally exempt from taxation

when any change in residence address occurs, every licensee and every applicant for a license must notify the commissioner?

immediately

what supports the medical information bureau?

insurance companies

when the public purchases annuities, they're attempting to address the risk of :

outliving the money they have saved for retirement

correct statement about a cost of living rider, the policy owner:

pays an additional premium for the extra protection the rider provides and will see the face amount of the contract increase according to the increase of the index

best beneficiary designation for this case? the children are to receive = shares, if any of the children die before the insured, the insured wishes the remaining children receive the deceased child's share equally divided among them.

per capita

in the life insurance planning process, the "blackout period" is considered?

period of time when a surviving spouse does no receive any social security benefits

whats not used to determine life insurance rates?

policy reserves

every licensee must indicate their policy number on what documents?

print advertisements, business cards, written price quotes

according to the terms of suicide clause found in a life policy, if an insured commits suicide within 6 months of the policy being issued, what will the insurer do?

refund all the premiums paid

harold, a variable annuity applicant, doesnt request the premium be invested in a stock or bond portfolio during the cancellation period, the policy is returned to the company w/in the cancellation period, whats he entitled to recieve?

the entire premium?

a policy owner stops paying premium on a 10-pay life and selects the extended term option, whats not true?

the extended term policy will reflect the same cash value as the original policy