Practice Exam - Life Insurance MI

if during the underwriting process an insurer obtains personal information about an applicant from the applicant, when must the insurer provide notice of its info practices? a. at the time of policy deliver b. never, since the info was obtained from the applicant c. at the time of application d. at the time the insurer first collects the info

a. a the time of policy delivery

whats the max fine for submitting a false or fraudulent claim to the insurer? a. $500 b. $1000 c. $1500 d. $2000

b. $1000

If an insurer terminates a producer, the Commissioner must be notified. How many days does the insurer have to deliver this notice? a. 3 days b. 30 days c. 10 days d. 7 days

b. 30 days

which of the following in another term for an authorized insurer? a. legal b. admitted c. certified d. licensed

b. admitted

the LEAST expensive first year premium is found in which of the following policies a. level term b. annually renewable term c. increasing term d. decreasing term

b. annually renewable term

which of the following types of agent authority is also called "perceived authority"? a. fiduciary b. apparent c. express d. implied

b. apparent

When must insurable interest exist in a life insurance policy? a. at the time of loss b. at the time of application c. at the time of policy delivery d. when theres a change of beneficiary

b. at the time of application

which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income? a. liquidation period b. depreciation period c. annuitization period d. pay out period

b. depreciation period

the provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is call the a. complete contract b. entire contract c. total contract d. aleatory contract

b. entire contract

a man wants to buy a life insurance policy in which he can count on guaranteed minimum benefits. which type should he buy? a. solid b. fixed c. level d. variable

b. fixed

annually renewable term policies provide a level death benefit for a premium that a. fluctuates b. increases annually c. decreases annually d. remains level

b. increases annually

which of the following would be best option that would help the surviving spouse of the insured to put her child through daycare after the insureds death? a. estate conservation b. life insurance proceeds c. state education waiver d. viatical settlement

b. life insurance proceeds

What type of whole life insurance policy has premiums that are adjusted so that during the first years of the policy, the premiums are lower than a straight WL policy, and higher in later years than that of a straight WL policy? a. enhanced life b. modified life c. indexed life d. indeterminate premium

b. modified life

Death benefits payable to a beneficiary under a life insurance policy are generally a. exempt from income taxation if over 10 grand b. not subject to income taxation by the fed government c. subject to income taxation by the fed government d. exempt from income taxation if under 10 grand

b. not subject to income taxation by the fed government

which of the following is correct concerning taxation of premiums in a key person life insurance policy? a. taxable to employee b. not tax deductible as a business expense c. tax deductible by key employee d. tax deductible as a business expense

b. not tax deductible as a business expense

which of the following documents must be provided to the policyowner or applicant during policy replacement? a. policy illustrations b. notice regarding replacement c. disclosure authorization form d. buyers guide and policy summary

b. notice regarding replacement

During replacement of life insurance, a replacing insurer must do which of the following? a. send a copy of the notice regarding replacement to the dept of insurance b. obtain a list of all life insurance policies that will be replaced c. guarantee a replacement for each existing policy d. designate a new producer for a replaced policy

b. obtain a list of all life insurance policies that will be replaced

Pertaining to insurance, what is the definition of a fiduciary responsibility? a. offering additional coverage to clients b. promptly forwarding premiums to the insurance company c. helping insureds to file claims d. performing reviews of insureds coverage

b. promptly forwarding premiums to the insurance company

Which of the following is the most common way to transfer risk? a. name a beneficiary b. purchase insurance c. increase control of claims d. lessen the possibility of loss

b. purchase insurance

In what way can an agent demonstrate a high standard of ethics? a. recommending qualified retirement plans to each client b. putting the clients best interests before their own c. making enough commissions to cover personal expenses d. setting and meeting monthly production goals

b. putting the clients best interests before their own

all of the following are true regarding rebates EXCEPT a. dividends are not considered to be rebates b. rebates are allowed if in the best interest of the client c. rebates are only allowed if specifically stated in the policy d. rebating can be anything of monetary value given as an inducement to purchase insurance

b. rebates are allowed if it is in the best interest of the client

an insured pays $1200 annually for life insurance premium. the insured applies this years $300 worth of accumulated dividends to the next years premium, reducing it to $900. this is the a. flexible premium b. reduction of premium c. accumulation at interest d. cash option

b. reduction of premium

what is a material misrepresentation? a. concealment b. statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance compay c. any misstatement made by the applicant for insurance d. any misstatement by the producer

b. statement by the applicant that, upon discover, would affect the underwriting decision of the insurance company

All of the following are requirements for life insurance illustrations EXCEPT a. they must differentiate between guaranteed and projected amounts. b. they must be part of the contract c. they may only be used as approved d. they must identify nonguaranteed values

b. they must be part of the contract

An absolute assignment is a a. change of insurer b. transfer of all ownership rights in a policy c. transfer of some ownership rights in a policy d. change of beneficiary

b. transfer of all ownership rights in a policy

How long will the beneficiary receive payments under the single life settlement option? a. until the insureds age 100 b. until the beneficiarys death c. until the insured death d. for a specified period of time

b. until the beneficiarys death

an insurance company receives an application with some information missing and issues the policy anyway. whats this called? a. aleatory b. waiver c. estoppel d. subrogation

b. waiver

in forming an insurance contract, when does acceptance usually occur? a. when insured submits app b. when insurers underwriter approves coverage c. when insurer delivers the policy d. when insurer receives an app

b. when insurers underwriter approves coverage

When a fixed annuity owner pays a monthly annuity premium to the insurance company, where is this money placed? a. each contracts separate account b. annuity owners account c. insurance company's general account d. forwarded to an investor

c. insurance companys general account

which of the following best describes annually renewable term insurance? a. neither premium or death benefit is affected by insureds age b. it provides an annually increasing death benefit c. its level term insurance d. requires proof of insurability at each renewal

c. its level term insurance

which of the following is NOT a goal of risk retention? a. increase control of claim reserving and claims settlements b. to fund losses that cannot be insured c. to minimize the insureds level of liability in the event of loss d. to reduce expenses and improve cash flow

c. minimize the insureds level of liability in the event of loss

which universal life option has a gradually increasing cash value and a level death benefit? a. term insurance b. option b c. option a d. juvenile life

c. option a

are insurance company underwrites allowed to discriminate? a. no, higher risks pay higher premium b. no discrimination is an unfair practice c. yes but only for gender d. yes but not unfairly

d. yes but not unfairly

articles of merchandise are allowed as gifts to insurance applicants as long as they do not exceed what max amount? a. $5 b. $10 c. $25 d. $100

$10

michigan insurance policies can specify a time limit during which legal action against insurer can be taken. this time limit however has to be at least a. 5 years b. 6 years c 3 years d. 4 years

6 years

How must a replacing producer respond to an applicant wishing to replace existing life insurance? a. must provide the applicant with a notice of regarding replacement b. must collect existing policies and turn them over to the replacing insurer c. must request the permission of the existing insurer d. has no specific duties

a producer must provide the applicant with a notice regarding replacement

an employer offers group life insurance to its employees for the amount of $10000. which of the following is true? a. cost of coverage is deductible expense by the employer b. value of insurance will be deducted from the employees compensation c. cost of coverage paid by the employer is taxed to the employees d. cost of coverage paid by the employer is tax deductible by the employee

a. cost of coverage is a deductible expense by the employer

which of the following statements about group life is correct a. cost of coverage is based on the ration of men to women in the group b. premiums are higher than in an individual policy because there is no medical exam c. group sponser receives a certificate of insurance d. policy can be converted to an individual term insurance policy

a. cost of coverage is based on the ration of men to women in the group

a long stretch of national economic hardship causes a 7% rate of inflation. a policyowner notices that the face value of her life insurance policy has been raised 7% as a result. which policy rider caused this change? a. cost of living rider b. value adjustment rider c. return of premium rider d. inflation rider

a. cost of living rider

which of the following individuals could qualify for a temporary insurance license? a. designee of a producer that is called to active service with the navy b. a deceased producers brother who is employed by the dept of insurance c. a retired producer d. an employee of a deceased producer

a. designee of a producer that is called to active service in the navy

what method is used to determine the taxable portion of each annuity payment a. exclusion ratio b. excise ration c. annuity to age ratio d. marginal tax formula

a. exclusion ratio

which is TRUE about the cash surrender nonforfeiture option? a. funds exceeding the premium paid are taxable as ordinary income b. after cash surrender, insured is covered for a grace period of 1 month c. policy remains active for some time after policyholder opts for cash surrender d. policyholder receives original cash value of the policy

a. funds exceeding the premium paid are taxable as ordinary income

B just bought a new car, which he anticipates will be paid for 4 years from now. He also wants to buy a life insurance policy, but is financially limited until the car is paid off. Which of the following types of policies would be best for B? a. modified life b. limited term life c. limited pay d. interest sensitive WL

a. modified life

a situation in which a person can only lose or have no change represents a. pure risk b. speculative risk c. adverse selection d. hazard

a. pure risk

what is the name of a clase that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military? a. war or military service b. limited benefit c. aviation d. hazardous occupation

a. war or military service

in order to qualify for conversion from a gourp life policy that has been terminated to an individual policy of the same coverage, a person must have been insured under the group plan for how many years? a. 1 b. 3 c. 5 d.10

c.

How much is an agents appointment fee? a. $1 b. $100 c. $5 d. $500

c. $5

if an agents license was revoked for violations of the statutes on relating or illegal inducnet, how soon aghwr the date of relocation can the agent apply for a new license? a. 3 months b. 6 months c. 1 year d. 2 years

c. 1 year

within what time period after completing prelicensing education must an applicant file a certificate of education completion with the commissioner? a. 30 days b. 90 days c. 12 months d 2 years

c. 12 months

If an insurer wishes to appoint a producer, it must file a notice of appointment within how many days of the date that the contract is executed? a. 45 days b. 7 days c. 15 days d. 30 days

c. 15 days

an insured owns a 50000 whole life policy. at age 47, the insured decides to cancel his policy and exercise the extended term option for the policys cash value, which is currently 20000. what would be the face amount of the new term policy? a. 20000 b. 25000 c. 50000 d. face amount will be determined by the insurer

c. 50000

Michigan's continuing education requirement has each of the following characteristics EXCEPT a. requires satisfactory completion of at least 24 hours of approved training every biennium b. other than the 3 hours ethics, licensees may take courses in any line c. allows up to 15 excess credit hours to be carried forward to the next reporting period d. atleast 3 hours must cover thisc

c. allows for up to 15 excess credit hours to be carried forward to the next reporting period

Who can make a fully deductible contribution to a traditional IRA? a. someone making contributions to an educational IRA b. a person whose contributions are funded by a return on investment c. an individual not covered by an employer sponsored plan who has earned income d. anybody; all IRA contributions are fully deductible regardless of income level

c. an individual not covered by an employer sponsored plan who has earned income

which of the following is a short term annuity that limits the amounts paid to a certain fixed period or until a certain fixed amount is liquidated? a. refund life b. variable annuity c. annuity certain d. fixed annuity

c. annuity certain

which of the following could be used when a corporation, association, partnership, or limited liability partnership acts as a producer? a. stock company b. mutual company c. business entity d. natural group

c. business entity

How are state Insurance Guaranty Associations funded? a. by the NAIC b. by the government c. by their members - authorized insurers d. by the department of insurance

c. by their members

all of the following are penalties for submitting fraudulent claims to the insurer EXCEPT a. imprisonment b. payment of restitution c. community service d. fine

c. community service

When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is a. personal b. unilateral c. conditional d. aleatory

c. conditonal

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated? a. representation b. adhesion c. consideration d. good faith

c. consideration

When twin brothers applied for life insurance from Company A, the company found that while neither of them smoked and both had a very similar lifestyle, one of the twins was in a much stronger financial position than the other. Because of this, the company charged him a higher rate for his insurance. This practice is considered a. controlled business b. adverse selection c. discrimination d. twisting

c. discrimination

what insurance concept is associated with the names Weiss and Fitch? a. types of mutual companies b. index used by stock companies c. guides describing company financial integrity d. policy dividends

c. guides describing company financial integrity

Which authority is NOT stated in an agent's contract but is required for the agent to conduct business? a. assumed b. express c. implied d. apparent

c. implied

an insurer receives a report regarding a potential insured that includes the insureds financial status, hobbies, and habits. what type of report is this? a. agents report b. underwrites report c. inspection report d. medical info bureaus report

c. inspection report

All of the following statements are true regarding installments for a fixed amount EXCEPT a. this option pays a specific amount until funds are exhausted b. annuitant may select how big the payments will be c. payments will stop when annuitant dies d. value of the account and future earnings will determine the time period for the benefits

c. payments will stop when the annuitant dies

A couple own's a life policy with a Children's Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to perm insurance in the future. Which of the following will she need to provide for proof of insurability? a. parents fed income tax receipts b. medical exam and parents medical history c. proof of insurability is not required d. medical exam

c. proof of insurability is not required

all of the following are beneficiary designations EXCEPT a. contingent b. primary c. specified d. tertiary

c. specified

which of the following is NOT the consideration in a policy? a. the premium amount paid at the time of application b. the promise to pay covered losses c. the application given to a prospective insured d. something of value exchanged between parties

c. the application given to a prospective insured

in an insurance company makes a statement that its policies are guaranteed by the existence of the insurance gauranty assoc. that it would be considered a. required disclosure b. legal representation of the assoc. c. unfair trade practice d. misrepresentation

c. unfair trade practice

When is the earliest a policy may go into effect? a. when the insurer approves the app b. after the underwriter reviews the policy c. when the app is signed and a check is given to the agen d. when the first premium is paid and the policy has been delivered

c. when the app is signed and a check is given to the agent

Randy owns a universal life policy. He just received a policy status report. How long until he receives the next report? a. 2 months b. 3 months c. 6 months d. 12 months

d. 12 months

An IRA uses immediate annuities to pay out benefits; the IRA owner is nearly 75 years old when he decides to collect distributions. What kind of penalty would the IRA owner pay? a. no penalties since owner is older than 59 1/2 b. 10% for early withdrawal c. 15% for early withdrawal d. 50% tax on the amount not distributed as required

d. 50% tax on the amount not distributed as required

an employee will be taxed on the cost of group life insurance paid by the employer is the amount of coverage exceeds a. 10000 b. 15000 c. 25000 d. 50000

d. 50000

licensees who are currently licensed, and have recently become residents of the state of michigan may not have to complete any prelicensing education. to qualify for this exemption, they must apply to become resident licensees within a few days of extablishing a legal residence within how many days? a. 30 days b. 60 days c. 7 days d. 90 days

d. 90 days

insurance policies are not drawn up through negotiations and an insured has little to say about its provisions. what contract characteristic does this describe? a. unilateral b. conditional c. personal d. adhesion

d. adhesion

Because an agent is using stationery with the logo of an insurance company, applicants for insurance assume that the agent is authorized to transact on behalf of that insurer. What type of agent authority does this describe? a. express b. implied c. assumed d. apparent

d. apparent

what does "liquidity" refer to in a life insurance policy? a. death benefit replaces the assets that would have accumulated if the insured had not died b. policyowner receives dividend checks each year c. insured receives payments each month in retirement d. cash values can be borrowed at any time

d. cash values can be borrowed at any time

a producer who fails to separate premium monies from his own personal funds is guilty of a. larceny b. embezzlement c. theft d. commingling

d. commingling

An adjustable life policyowner can change which of the following policy features? a. mortality expense b. investment account c. insured d. coverage period

d. coverage period

Who can make changes to the policy once it is in effect? a. insured b. policyowner c. agent d. executive officer of the insurer

d. executive officer of the insurer

According to the nonforfeiture law, if the owner decides to surrender a deferred annuity prior to annuitization, the owner is entitled to which of the following? a. no payments b. annuity dividends c. full premium refund without any charges d. guaranteed surrender value

d. guaranteed surrender value

what is the benefit of choosing extended term as a nonforfeiture option? a. it matures at age 100 b. allows for coverage to continue beyond maturity date c. can be converted to a fixed annuity d. has the highest amount of insurance protection

d. has the highest amount of insurance protection

whats the benefit of choosing extended term as a nonforfeiture option? a. matures at age 100 b. allows for coverage to continue beyond maturity date c. can be converted to a fixed annuity d. has the highest amount of insurance protection

d. has the highest amount of insurance protection

Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost? a. stop-loss b. consideration c. reasonable expectations d. indemnity

d. indemnity

An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT? a. insured wouldnt need to prove insurability for a conversion policy b. insured may convert coverage to an individual policy within 31 days c. premium for individual coverage will be based upon the insured attained age d. insured may choose to convert to term or permanent individual coverage

d. insured may choose to convert to term or permanent individual coverage

which of the following ultimately determines the interest rates paid to the owner of a fixed annuity? a. investment performance of the company b. investment performance of the insured c. statewide predetermined annual interest rate d. insurers guaranteed minimum rate of interest

d. insurers guaranteed minimum rate of interest

an applicant for a counselors license in michigan must possess all of the following EXCEPT a. good business reputation and good moral character b. reasonable understanding of the michigan insurance code c. reasonable understanding of the provisions, terms, and conditions of the type of insurance he/she wishes to counsel d. license to practice law

d. license to practice law

Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insureds death? a. business partner of insured b. wife of deceased insured c. former wife of deceased insured d. minor son of insured

d. minor son of insured

which of the following is NOT true regarding policy loans? a. policy loans can be repaid at death b. an insurer can charge interest on outstanding policy loans c. policy loan may be repaid after the policy is surrendered d. money borrowed from the cash value is taxable

d. money borrowed from cash value is taxable

which of the following is NOT true regarding a nonqualified retirement plan? a. contributions are not currently tax deductible b. in can discriminate in benefits and selecting participants c. earnings grow tax deferred d. need IRS approval

d. needs irs approval

Under a straight life annuity, if the annuitant dies before the principal amount is paid out, the beneficiary will receive a. guaranteed minimum benefit b. amount paid into the annuity c. remainder of the principal d. nothing, payments will cease

d. nothing. the payments will cease

what is a definition of a unilateral contract? a. 2 or more parties go into a contract understanding there may be an unequal exchange of value b. one author; the company wrote the contract, the insured must accept it as written c. if one party makes a condition, the other party can counteroffer d. one sided; only one party makes an enforceable promise

d. one sided; only one party makes an enforceable promise

an individual applies for a life policy. 2 years ago he suffered a head injury from an accident, so he cant remember parts of his past, but is otherwise competent. he has also been hospitalized for drug abuse, but doesnt remember this when applying for insurance. the insurer issues the policy and learns of his history 1 year later. what will probably happen? a. policy will be voided b. insurer will sue the insured for committing fraud c. because the insured is currently not a drug user, his policy will not be affected d. policy will not be affected

d. policy will not be affected

an insurer wants to obtain info from investigators regarding an applicant for insurance. what must the insurer do to legally acquire this info? a. receive written permission from the dept of insurance b. receive a signed statement from the insured which authorizes the investigation c. sign a waiver that the info will be kept confidential d. present the insured with a disclosure authorization notice

d. present the insured with a disclosure authorization notice

another name for substandard risk classification is a. controlled b. declined c. elevated d. rated

d. rated

which of the following insurance options would be considered a risk sharing arrangement? a. stock b. mutual c. surplus lines d. reciprocal

d. reciprocal

Which nonforfeiture option provides coverage for the longest period of time? a. extended term b. paid up option c. accumulated at interest d. reduced paid up

d. reduced paid up

Which of the following is true about the premium on the childrens rider in a life insurance policy? a. decreases when the oldest child reaches age 21 b. increases when a newborn baby is added c. decreases when an adopted childe is added to the policy d. remains the same no matter how many kids are added to the policy

d. remains the same no matter how many kids are added to the policy

an insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insureds age 100 is called a. modified endowment contract (mec) b. level term life c. graded premium d. single premium whole life

d. single premium whole life

If a life insurance policy has an irrevocable beneficiary designation, a. the beneficiary cant be changed for atleast 2 years b. the owner can always change the beneficiary at will c. the beneficiary cant be changed d. the beneficiary can only be changed with written permission of the beneficiary

d. the beneficiary can only be changed with written permission of the beneficiary

when an individual purchases insurance, what risk management technique is he or she practicing? a. avoidance b. sharing c. retention d. transfer

d. transfer