Practice LI Test

What is the closest term to an authorized insurer?

admitted

What would be considered a nonqualified retirement plan?

split-dollar plan

If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it?

Unilateral

How long is the incontestability period in group life insurance policies issued in Texas?

2 years

An agent completed a CE course in 2019. Until what year must the agent keep the records of completion?

2023

In Texas, the Commissioner of Insurance is

Appointed by the Governor.

An insured receives an annual life insurance dividend check. What term best describes this arrangement?

Cash option

What is TRUE about credit life insurance?

creditor is the policyowner

The death protection component of Universal Life Insurance is always

Annually Renewable Term

In a direct rollover, how is the money transferred from one plan to the new one?

From trustee to trustee

An insured purchased a Life Insurance policy. The agent told him that depending upon the company's investments and expense factors, the cash values could change from those shown in the policy at issue time. The policy is a/an

Interest-sensitive Whole Life.

All of the following are mandatory life insurance policy provisions EXCEPT a.Policy backdating. b.Misstatement of age. c.Incontestability. d.Grace period.

Policy backdating

Which of the following has the right to convert the existing term coverage to permanent insurance? a.Beneficiary b.Producer c. Policyowner d. Insurer

Policyowner

Which is NOT true about beneficiary designations? a.The policy does not have to have a beneficiary named in order to be valid. b.Trusts can be valid beneficiaries. c.The beneficiary must have insurable interest in the insured. d.The beneficiary may be a natural person.

The beneficiary must have insurable interest in the insured.

What of the following best describes the aleatory nature of an insurance contract?

exchange of unequal values

Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained?

3 days

If an agent suspects that insurance fraud is being committed, within how many days must the agent notify the Insurance Fraud Unit of the Department of Insurance?

30 days

The Commissioner of Insurance issues a Cease and Desist Order to an agent. If the agent wishes to contest the charges in court, how many days after the order was issued does the agent have to make the request?

30 days

An agent's license will terminate within how many days from the due date of obligatory fees and continuing education requirements?

90 days

Life income joint and survivor settlement option guarantees

Income for 2 or more recipients until they die.

What is the purpose of a conditional receipt?

It is intended to provide coverage on a date prior to the policy issue.

Which of the following is TRUE regarding the annuity period? a.It is also referred to as the accumulation period. b.It is the period of time during which the annuitant makes premium payments into the annuity. c.It may last for the lifetime of the annuitant. d.During this period of time the annuity payments grow interest tax deferred.

It may last for the lifetime of the annuitant.

On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are

Not taxable since the IRS treats them as a return of a portion of the premium paid.

The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the

One-year term option.

Which of the following statements concerning a Simplified Employee Pension plan (SEP) is INCORRECT? a.Employer contributions are not included in the employee's gross income. b.SEPs are suitable for large companies. c.SEPs allow the employer to make annual tax deductible contributions up to 25% of an employee's earned income. d.SEPs have a higher tax deductible contribution limit than an IRA.

SEPs are suitable for large companies

What insurers are owned by stockholders who have the usual rights of ownership, including the right of voting?

Stock

What would provide an underwriter with information concerning an applicant's health history?

The Medical Information Bureau

A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true? a.The amount of the distribution is reduced by the amount of a 20% withholding tax. b.No taxes are due since the plan participant is over age 59 1/2. c.There is a 10% early withdrawal penalty. d.The amount distributed is subject to ordinary income tax.

The amount of the distribution is reduced by the amount of a 20% withholding tax.

An agent holds an insurance license in the state of Kansas and would like to transact insurance in Texas. The agent became licensed before written examinations were required. Therefore, the agent has not actually passed any kind of examination. What is true?

The written examination requirement will be waived.

An agent explains the details of a life insurance policy to a client. The agent does not realize, however, that the state has recently rewritten two of the provisions. As a result, the agent inadvertently misrepresents the policy, making it more attractive than it really is. What best describes this situation?

There is no misconduct

All of the following are Nonforfeiture options EXCEPT a. Reduced paid-up b. Interest only c. Cash surrender d. Extended term

interest only

All of the following statements concerning an employer sponsored nonqualified retirement plan are true EXCEPT a. The plan is not approved for favorable tax treatment by the IRS. b.The employer can receive a current tax deduction for any contributions made to the plan. c.The plan is a legal method of accumulating money for retirement needs. d.The plan can discriminate as to who may participate.

The employer can receive a current tax deduction for any contributions made to the plan.

Which two terms are associated directly with the premium?

level or flexible

If a policyowner surrenders his life insurance policy that has been in force for 5 years within 60 days after the premium due date, what will the insurer be required to pay?

A cash surrender value

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

Discrimination.

Which of the following is true regarding taxation of dividends in participating policies? a.Dividends are not taxable. b.Dividends are taxable only after a certain amount is accumulated annually. c.Dividends are taxable in some life insurance policies and nontaxable in others. d.Dividends are considered income for tax purposes.

Dividends are not taxable.

Which of the following is NOT true regarding Equity Indexed Annuities? a.They have guaranteed minimum interest rates. b.They are less risky than variable annuities. c.They earn lower interest rates than fixed annuities. d.The insurance company keeps a percentage of the returns.

They earn lower interest rates than fixed annuities.

All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT a.An offer to share in commissions generated by the sale. b.Dividends from a mutual insurer. c.An offer of employment. d.Stocks, securities, or bonds.

dividends from a mutual insurer

When is the earliest a policy may go into effect?

When the application is signed and a check is given to the agent

An insurance professional advises a client regarding the benefits of her life insurance policy, in exchange for a fee. Which of the following terms best describes this type of insurance professional?

counselor