Practice Life Exam C

21. Which department or division of an insurance company is responsible for the selection, evaluation, and distribution of risks?

B. Underwriting

6. In a group life insurance plan, unmarried children may be covered as eligible dependants until they reach the age of:

C. 21

31. There are four basic classes of life insurance. All of the following may be regarded as ordinary insurance, except:

C. A group life insurance policy.

39. Which of the following would an insured use to protect against the negative effect of inflation on the future purchasing power of their life or disability income policy?

C. Cost of Living rider

75. A dependent who is developmentally disabled can continue to be covered by the insured's policy:

C. For as long as the condition causing the disability persists.

30. The owner chooses the annual mode to pay their life insurance premium. For the year, they will pay _________________

C. Less as compared to the other payment modes.

55. An insurance company that is owned by the policyholders is called a:

C. Mutual insurer

11. When determining life insurance premium rates an insurer may not legally use which of the following?

C. Nationality

67. When may a representation be withdrawn by the applicant?

C. Only before the insurance is in effect.

14. Which of the following is a true statement about contributory group life insurance?

C. Participating employees will contribute towards the payment of premiums.

27. In reinsurance, the insurance company who transfers its loss exposure to another insurer is the:

C. Primary insurer

23. Cliff, who is 44 years old, falls while mountain climbing on vacation. He is left paralyzed. After a year, doctors feel he will never recover from his injuries. Which of the following programs will he be able to collect disability income?

C. Social Security

48. An individual investor is trying to decide between a bank C.D. and an insurance company annuity. They both pay the same interest rate on an equal principal amount invested over the same period of time. Which one will be worth the most total dollars at the end of that period of time?

C. The annuity will be worth more because of its tax deferred characteristics.

56. The California Insurance Commissioner may deny an application for license for all of the following reasons, except:

C. The applicant does not have a California business address.

3. Which of the following best represents what the phrase "life insurance creates an immediate estate" means?

C. The face value of the policy is payable to the beneficiary upon the death of the insured

58. Regarding group life insurance coverage sponsored by a business, which of the following persons is the one responsible for applying for the plan, providing member info, making the premium payments for the members, and maintaining the policy or contract?

C. The master policyholder.

38. Which of the following policy riders is/are frequently found in life insurance policies?

A. Cost of Living rider B. AD&D C. Waiver of Premium

19. Concerning federal tax treatment of life insurance payments, which of the following statements is/are correct?

A. Death benefits paid to the beneficiary are generally tax exempt.

66. Common life insurance policy riders include all of the following, except:

A. Extended term

53. All of the following are policy dividend options, except:

A. Fund the distribution of periodic income payments.

22. Which of the following are members of and financially supports the Medical Information Bureau?

A. Insurance companies

15. All of the following are not true about the Social Security program, except:

A. It is mandatory for most workers to pay FICA taxes.

51. In which of the following classes of insurance can a binder not be issued?

A. Life insurance

4. When policy illustrations are used with senior citizen clients in California, which include non-guaranteed elements, a statement to that effect must be included with the illustration. Which of the following is true regarding this statement?

A. Non-guaranteed elements must be printed in bold type.

74. Which of the following is an agent only required to present to elder clients?

A. Notice of Medi-Cal eligibility

42. Which of the following beneficiary designations would meet the policyowner's wish to have his children receive equal shares of his life insurance. And if any of his children should die before he does, he wants the surviving children to receive the deceased child's share equally divided among them.

A. Per capita designation

26. Which of the following statements about contingent beneficiaries is false?

A. The contingent beneficiary receives benefits equally with the primary beneficiary

64. Why is having a large number of similar exposure units important to insurance companies?

A. The larger the number insured, the more accurately the insurer can predict losses and set appropriate premiums.

57. In life insurance, the death of a key family member is considered what type of loss?

A. A personal loss

32. Bob, the owner and insured has a non-participating whole life policy for $50,000. He never misses a payment and has never borrowed from the cash value. Bob turned 100 years old today. How much of the cash value is he entitled to?

A. All of it, $50,000

45. A contract or policy, which is considered a savings or investment vehicle used for the purpose of accumulating investment funds to be paid out some time in the future through a withdrawal provision, describes which of the following?

A. An annuity

20. All of the following are true regarding the taxation of life insurance products, except:

A. Annuity death benefits are paid out totally tax free.

12. Group members that are covered by group life insurance policies are required to be issued which of the following?

B. A Certificate of Insurance

47. The annuitant is about to retire and wants to begin receiving payments from the insurer. He has selected the "Life income with 10 years certain" option. Which of the following is the best description of the payments the insurer will make?

C. They will be paid for at least 120 months or the remainder of the annuitant's life.

73. A retirement plan participant's absolute ownership of the monies in his or her account is referred as:

C. Vested

69. When an agent, broker, or solicitor handles premiums for an insurer, they are acting in which of the following capacities?

D. A fiduciary.

18. Which statement about federal income taxation of life insurance settlement payments is true?

D. A lump sum settlement is paid out tax free when paid to a natural person.

71. Viatical settlement agreements are put into effect by which of the following?

D. An absolute assignment.

29. Which of the following statements is false regarding the application for life insurance?

D. Before a policy can be issued or changed, the beneficiary must initial the application to indicate their approval.

34. Concerning the "Family Protection Policy" all of the following statements are true, except:

D. Children, upon reaching the age of majority are permitted to convert to an individual policy with proof of insurability.

33. A beneficiary is set to receive $2,500 a month until the lump sum amount and interest are exhausted. Which settlement option was chosen?

D. Fixed amount option

7. What happens to the insurance license of a corporation when the corporation ceases to exist?

D. It terminates

62. As per the Code, when are the parties to a contract required to communicate to the other information which is based solely on their personal judgment?

D. Never

8. All of the following are true about the Social Security System except:

B. The system is fully funded.

9. The insured buys a non-participating whole life policy. Many years later the insured is disabled and cannot afford the premiums anymore. She exercises the Extended Term Non-forfeiture option. Which statement is not true?

A. The policy will accrue cash value, but with a lower death benefit coverage.

61. The risk management technique of loss retention is effective when all of the following conditions exist, except:

A. The probability of loss is unknown.

68. The purpose of the laws regarding the replacement of life insurance and annuity contracts includes all of the following, except:

A. To protect the interests of life insurers and their agents.

16. Keith has purchased a variable annuity. He has not waived his rights during the freelook period. Where will the premiums be initially invested during the free-look period?

B. A fixed income or money market account

1. A representation in an insurance contract qualifies as:

B. An implied warranty

13. Agent Bill has decided to use a new time management strategy while making sales presentations. To save time he decides to not answer a client's question the first time it is asked. Instead he answers them only if they are asked a second time. This way he can make it to his next appointment on time. Professional insurance organizations would consider this to be:

B. An unethical practice

2. An insurer owned by the parent company to provide insurance to cover the parent company's loss exposure only is called a:

B. Captive insurer

5. In which of the following qualified plans are the benefits linked to the employee's number of years of service and/or the amount of compensation they earned?

B. Defined benefit plan

28. In group insurance, to avoid proving insurability an employee usually needs to join the group insurance plan:

B. During the enrollment period

25. Which of the following benefits is never included in a LTC policy?

B. Hospice Acute Care

35. The additional amount of premium paid for an accidental death benefit rider on a whole life policy does not:

B. Increase the cash values

59. What do we call an insurer who has enough financial resources to only provide for all its liabilities and for reinsurance of all outstanding risks?

B. Insolvent

50. Any transaction in which new life insurance or a new annuity is to be purchased, and it is known or should be known that existing life insurance or annuity will be lapsed, forfeited, surrendered, or otherwise terminated is known as what type of transaction?

B. Replacement

65. When an agent submits a license renewal application with the required renewal fee on or before the expiration date, which of the following statements is true?

B. The agent may transact all normal business for up to 60 days after the specified expiration date.

41. All of the following statements are true about the free look provision in life insurance policies in California, except:

B. The contract is in force during the 10 day period and any claims must be paid even though the owner has returned the contract.

54. The standard policy provision which prevents an insurance company from rescinding a policy for misstatements on the application after two years is:

B. The incontestability provision

70. In order to calculate how much premium an insurance policyowner will pay, the insurer multiplies the rate by which of the following?

B. The number of exposure units

17. A variable annuity applicant invests his premiums immediately into the stock portfolio chosen for his annuity. He then returns his annuity during the free look period when the stock market drops significantly. What will the client receive?

C. The policy account value on the date the returned policy is received by the insurer

72. What is the written instrument called in which the contract of insurance is set forth?

C. The policy.

36. When the insured becomes disabled under the requirements of the policy, which of the following provisions keeps the policy in force even though the owner stopsmaking the premium payments?

C. The waiver of premium provision

46. One of the reasons that a person would purchase an annuity is that they are concerned with the risk of:

D. Outliving their retirement income.

24. The Social Security system has four main benefit programs. Disability, Retirement, & Medicare are three of them. The fourth program is:

D. Survivors

40. Larry is age 50, has been paying premiums on his whole life policy for more than 15 years, and now has a need to use about 1/3 of his available cash value for a short period of time. He does not want to give up his insurance, and can afford to continue paying premiums. What advice would you give Larry?

D. Tell Larry to take the policy loan, continue paying premiums to prevent a lapse, and also recommend that he repay the principal and interest on the loan.

63. Which of the following would be appropriate for an individual with a low income and high insurance needs?

D. Term insurance

52. If an agent currently has an inactive license, this means

D. The agent cannot transact any insurance business for which a valid license is required.

43. Life insurance settlement options provide the beneficiary several choices as to how the insurer will pay them the death benefits of the policy. Which of the following isnot true about these options?

D. The beneficiary can change to a second option if made within 6 months of the initial payout.

44. An insurance commissioner is unable to finish their 4 year term due to death or for some reason leaves office. How will a new commissioner be chosen?

D. The governor appoints a replacement commissioner

10. Which of the following best describes the reduced paid-up non-forfeiture option?

D. The insured exchanges the current whole life policy for another whole life policy with a lower death benefit. A reduced premium is charged. No additional premium is required

37. With a waiver of premium rider attached to a whole life policy issued by a mutual insurer, all of the following are true, except:

D. The insurer will waive the premium payment while the policyowner will continue to pay the cost of the WP rider.

60. What is the purpose of "key person" insurance?

D. To cover decreased business revenues as a result of the death or disability of a key employee.

49. Ron is paying into an annuity that will be used to help supplement his retirement in a few years. His premium payments go into the insurer's "separate account" and they purchase "accumulation units." What type of annuity did Ron buy?

D. Variable annuity