practice questions

How long is the grace period for an individual life insurance policy?

1 month

An IRA owner who is 57 years old wants to make a withdrawal from her traditional IRA. What penalty will be imposed?

10%

In a noncontributory group policy

100% of eligible employees must participate in

An insured decides to replace his life insurance policy with one offered by a new insurer. After receiving the policy, he is unsatisfied with the provisions and decides to return it. Within how many days must he return the policy in order to receive a full premium refund?

30

During policy replacement, the replacing insurer must notify existing insurers within what time period?

5 business days

If a credit life policy lapses for nonpayment before the debt is satisfied, within how many days must the creditor either refund the premium paid or apply it against the debt?

60

Which of the following will NOT bitconsidered unfair discrimination by insurers?

Discriminating in benefits and coverages based on the insured's habits and lifestyle

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.

Which is TRUE about the cash surrender nonforfeiture option?

Funds exceeding the premium paid are taxable as ordinary income.

As an insurer's field underwriter, a producer has all of the following responsibilities EXCEPT

Issuing policies on behalf of the insurer

Which of the following best defines the unfair trade practice of rebating?

Offering an inducement of something of value not specified in the policy

All of the following are true of credit life EXCEPT

The insured names the beneficiary.

Which of the following is NOT true regarding Equity Indexed Annuities?

They earn lower interest rates than fixed annuities.

The Waiver of Cost of Insurance rider is found in what type of insurance?

Universal Life

The death protection component of Universal Life Insurance is always

annually renewable term

Which of the following would NOT trigger the payment of Accelerated Death Benefits?

being permanently disabled

Which Universal Life option has a gradually increasing cash value and a level death benefit?

option a

According to the life insurance replacement regulations, which of the following would be an example of policy replacement?

A policy is reissued with a reduction in cash value.

Which of the following is INCORRECT regarding a $100,000 20-year level term policy?

At the end of 20 years, the policy's cash value will equal $100,000.

What does the state Life and Health Insurance Guaranty Association guard against?

Insurer insolvency

An insurance company that is owned by the policyholders is called a

Mutual insurer

agency wants to obtain license statistics on one of its new producers. It requests a document that the Insurance Department can produce, which lists the producer's license status, lines of license that the producer can transact, and other information. This report is called a

certification of income status

A new homebuyer wants to purchase a life insurance policy that would protect his family against losing the home, should he die before the mortgage was paid. The most inexpensive type of policy that would accomplish this need would be

decreasing term

An insurer mails an insurance policy to a new policyowner. When the insurer relinquishes control of the policy, the policy is considered

delivered

When a whole life policy is surrendered for its nonforfeiture value, what is the automatic option?

extend term

married couple wants to include the entire family in their whole life policy under one rider. Which of the following riders will help them achieve that goal?

family term

The Guaranteed Insurability Rider allows the owner to purchase additional amounts of life insurance without proof of insurability at all of the following EXCEPT

purchase a new home

Upon the surrender of a life insurance policy, any cash value accumulated in excess of the premium payments is

taxed as ordinary income

a policy contains an unconditional refund provision of at least 10 days, the buyer's guide and policy summary can be delivered at what latest possible point?

when the policy is delivered

Who can make a fully deductible contribution to a traditional IRA?

individual not covered by an employer-sponsored plan who has earned income. Individuals who are not covered by an employer-sponsored plan may deduct the amount of their IRA contributions regardless of their income level.

With Adjustable Life, the owner can change all of the following EXCEPT

insured

Your client wants to provide a retirement income for his elderly parents in case something happens to him. He wants to make sure that both beneficiaries are guaranteed an income for life. Which settlement option should this policyowner select?

joint and survivor

Which of the following statements is INCORRECT concerning business operations in a branch office in New Jersey?

A branch office certificate expires 2 years from the date of filing, regardless of the producer's own license expiration.

Where are premiums from fixed annuities invested?

A general account

Under which of the following conditions would life insurance proceeds be taxable by the federal government?

If there is a transfer for value

How does insurance distribute the financial consequences of individual losses?

It transfers the risk to all persons insured.

In contrasting stock insurers with mutual insurers, which statement is true?

Stock insurers are owned by the shareholders and issue nonparticipating policies.

What happens to the face amount of a whole life policy if the insured reaches the age of 100?

The face amount is paid to the insured

Which of the following entities is considered the principal?

The insurer issuing a policy

Which statement below is INCORRECT regarding the type of term insurance that fits best with the applicant's needs?

Applicants who may require a larger death benefit in the future should buy convertible term insurance.

The family term rider incorporates

Spouse term and children's term.

insurance agent visits a potential client and explains various types of policies. The customer displays a lack of interest, so the agent guarantees higher dividends than he knows would be possible. Which term describes what the agent has done?

Misrepresentation

Dividends received on participating life insurance policies are

Not taxable because they are a return of unused premiums.

What effect will the long-term care (LTC) rider have on the death benefit of a life insurance policy if LTC benefits were paid to the insured?

Reduce the death benefit

Which nonforfeiture option provides coverage for the longest period of time?

Reduced Paid-Up

All of the following are true regarding the federal Fair Credit Reporting Act EXCEPT

Reports may be sent to anyone who requests one.