Primerica Life Insurance Test

Which of the following is not a type of hazard

Exposure

Which of the following best describes pure life annuity

It provides the highest monthly benefits

Which of the following is the best definition of "indemnification"?

The act of one person who agrees to restore an injured person to the condition he/she enjoyed prior to the loss

Which of the following is true regarding premium in a 10-year level premium policy

The premium will maintain for 10 years

An insured recently had a new home built and insisted on having smoke detectors installed in multiple places in the house. Wha method of handling risks is the insured using?

Reduction

The commissioner may disapprove the use of any name for a licensee for any of the following reasons EXCEPT

The licensee already has an approved name

All of the following are true of the Survivorship Life Policy EXCEPT

The premium is based on the age of each insured

All of the following are true of credit life EXCEPT

The insured names the beneficiary

A 25-year old full-time student is living off a trust fund. Why would he NOT qualify for an IRA?

He does not have earned income

Which of the following is true regarding the surrender charge in a market value adjusted annuity?

If the current rate at the time of surrender is the same as the contract rate, there is no adjustment

When assessing needs for life insurance, an individual may use retention, which means

Maintaining assets at death

Any intentional and fraudulent omission on the part of one insured entitles the insurer to

Rescind the policy

Which of the following would NOT be eligible for coverage under key person

The owner of a shop

What are the continuing education requirements for agents who market long term care insurance policies?

8 hours of long term care specific education included in the regular CE requirements

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

60 days

Individual members covered by group life insurance receive

A certificate of insurance

A life insurance policy that provides coverage to every family member in a single policy, with permanent insurance on the breadwinner

A family policy

There is a 10% penalty on he taxable portion of a deferred annuity when it is surrendered prior to what age?

59 1/2

A retail shop owner is insured under a business overhead expense policy that pays a maximum monthly benefit of $2,500

$2,500

What is the minimum number of member required for group life insurance in this state

10

How many days is the free-look period in most life insurance policies

10 days

In a group life insurance plan, children of the employee may be covered as eligible dependents until they reach the age of

26

Credit Life Insurance who is responsible for paying the policy premiums

Borrower only

When an insurer tries to discourage a policyholder from replacing an existing policy, this is called

Conservation effort

The term "limit of liability" refers to

Death benefit payable to the beneficiary

Which of the following is a correct statement about annuities

Fixed annuities do not provide protection against inflation

All of the following information needs to be included on an application for life insurance EXCEPT

Health insurance policies in force

To purchase insurance, The policy owner must face the possibility of losing money or something of value in the event of loss. What is this concept called?

Insurable interest

A college student will graduate next year. His studies have limited his ability to work, so he has borrowed funds to pay for his education

Modified whole life

Which statements best describe agreement as it relates to insurance contracts

One party accepts the exact terms of the other party's offer

An equity indexed annuity will grow based upon

Performance of a recognized index

What does the application of contract of adhesion mean?

Since the insured does not participate in preparing the contract, any ambiguities would be resolved in favor of the insured

A whole life policy that will generate immediate cash value is a

Single premium policy

If an applicants health is poorer than that of an average applicant, the policy may be issued

Substandard

In a deferred annuity, the difference between the accumulation value and the surrender value is the

Surrender charge

The Insurance Commissioner may deny an applicant an insurance license for any of the following reasons EXCEPT

The applicant does not have a California business address

All of the following statements about indexed whole life insurance are correct EXCEPT

The death benefit is not guaranteed

All of the following are true about key person insurance EXCEPT

The death benefit is taxable to the business.

If the annuitant dies before the annuity start date, which of the following are true

The interest is taxable

Which method of dealing with risk is applied when insurance is purchased

Transfer

Which of the following is NOT an example of the company's location of incorporation

authorized

A whole life policy is surrendered for a reduced-paid up policy. The cash value in the new policy will

continue to increase

An employee dies having 6 quarters of coverage during the previous 13-quarter period. What status of coverage does the employee have under Social Security?

currently insured

cash value guarantees in a whole life policy are called

nonforfeiture values

A married couple wants to include the entire family in their whole life policy under one rider. Which of

Family term

Which of the following NOT be eligible for coverage under key person

The owner of the shop

The entire contract includes all of the following EXCEPT

A buyers guide

If an individual willfully violates provisions of the Fair Credit reporting act, what is the maximum civil penalty

$2,500

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

An annuity's contract holder dies before the annuitization date. Taxes on the contracts interest will continue to be deferred if the beneficiary

A spouse

Concerning the Family Protection Policy, all of the following statements are true EXCEPT

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

What type of an interest rate is guaranteed in universal life policies?

Contract interest rate

Decreasing Term insurance is often used to

Cover a mortgage

A stock insurer is defined as an insurer

Owned by its stockholders

Which of the following is the cause of loss

Peril

If an insured purchases an insurance policy with a large deductible, what risk management technique is the insured exercising

Retention

An individual purchases a life insurance policy and lists his parents as the beneficiaries. He is able to change beneficiaries at any time. What type of beneficiary designation does the policy have?

Revocable

An insured intentionally did not disclose a material fact on an application for insurance. This would be considered

concealment

Slippery floors, reckless driving, or providing false information are examples of..

hazards

Partners in a business want to make sure that if

Buy-Sell Agreement

Which of the following is the primary source of information that an insurer uses to evaluate an insureds risk for life insurance

Insurance application

The provision that sets forth the basic agreement between the insurer and the insured

Insuring clause.

An insurance company that is owned by the policyholders is called

Mutual insurer

The reduction of premium option uses the dividend to reduce

Next year's premium

When an agent delivered an insurance policy to the insured, he collected the initial premium, as well as a document verifying that the insured had not had any injuries or illness since the application date. What is this document called?

Statement of Good Health

All of the following are required for HIV testing EXCEPT

If HIV is present, the person may be rated, but they cannot be declined *A person with the HIV can be declined

Which of the following is NOT true regarding a deferred annuity

Income payments begin within 1 year from the date of the purchase.

A fraternal benefit society

Is operated for the benefit of its members

Which of the following statements describes one of the reasons individuals purchase life insurance?

It creates an immediate estate.

Which of the following is true regarding pure life annuity settlement option?

It provides the highest monthly benefit

The human life value approach to determining life insurance needs is based upon which of the following ideas

Loss of the breadwinners income

Guaranteeing future dividends is considered to be unfair or deceptive act known as

Misrepresentation

In order to reinstate a life insurance policy the insured must do all of the following EXCEPT

Pay next year's premium in advance

In a life insurance application, all of the following signatures will be required EXCEPT

The home office underwriter

All of the following are advantages of a qualified retirement plan EXCEPT

The income at retirement is tax free

Which of the following is true regarding taxation of accelerated paid under a life insurance policy

They are received tax free

Which of the following actions does NOT constitute false advertising?

Requiring applications more quickly than is reasonable

Which of the following is true regarding a joint life annuity

The payments stop at the first death

Which of the following has the right to change a settlement option in a life insurance policy

The policy owner at any time during the life of the insured

What is the purpose of the Agents Report in the application process

To provide additional information about the applicant to the underwriters

Which of the following types of insurance is investment based, has a level fixed premium, and a non guaranteed cash value?

Variable whole life

Which of the following statements is INCORRECT concerning Modified Endowment Contracts (MECs)

An MEC must always pass the 7-pay test

Wagering on a sporting event is known as what type of risk?

Speculative risk

An insurer who transacts insurance in this state but whose articles of incorporation are registered in Canada is considered what type of insurer

Alien

Life settlement contracts are out into effect by which of the following

An absolute assignment

A loss recruiting from which of the following would qualify for the accidental death rider coverage?

An automobile accident

Which of the following is NOT a personal use of life insurance

An individual buys insurance to fund a buy-sell agreement.

Which of the following is NOT an indicator of a competent party?

Business profession

A representation in an insurance contract qualifies as a

Implied warranty

Restoring an insured financially after a claim is know as

Indemnity.

An insurer must notify the consumer in writing that an investigative consumer report has been requested, within how many days of the initial request?

3 days

Some deferred annuities include an adjustment that subjects the owner of the annuity to share in a loss or gain due to a premature

A Market Value Adjusted Annuity

Group members that are covered by group life insurance policies will be issued which of the following?

A certificate of insurance

According to the California Insurance Code any person legally capable of making an insurance policy is considered

An insurer

The owner of a whole life policy with an accidental death rider intentionally kills himself after having the policy for 18 months. What is the insurance company's course of action?

Deny any payments

Which of the following is NOT a standard exclusion in life insurance policies

Disability

For an insurance contract, utmost good faith means:

Each party relies upon the truthfulness of the other

An adjustable life policy can assume the form of

Either term insurance or permanent insurance

All of the following are ways to handle risk EXCEPT

Elimination

Which of the following activities of an agent would NOT be interpreted as transacting insurance?

Establishing a list of clients

When life insurance proceeds are used to pay inheritance taxes and federal estate taxes, it is known as

Estate conservation

Which of the following employee benefits essentially provides the employee with a wage

Executive Bonus

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

If there is a transfer for value

Hazards are conditions or situations that

Increase the likelihood of a loss occurring

A jumping Juvenile Policy is unique in that the death benefit automatically

Increases as a predetermined age

Which of the following statements is TRUE regarding an Agents Report during the policy application process?

It provides the agents personal observations concerning the proposed insured

What is the most common name for a single policy that is designed to insure two or more lives with a standard premium

Joint Life

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.

Joint and Survivor

When comparing a Joint Life Policy to two individual life policies of the same amount on the same insureds which condition is true

Joint life has a lower premium that the total of the two individual policies

For a contract to be enforceable by law, the purpose of the contract must be

Legal and not against public policy

The policy owner chooses the annual mode for the no payment of the life insurance premium. For the year the owner will pay

Less as compared to the other payment modes.

Insurance contracts are unilateral in nature. What does this mean?

Only one party make a promise

In a group life policy with a death benefit of more than $50,000

Premium cost above $50,000 is taxable as income to the employee

The family term rider incorporates

Spouse term and children's term

Who does the spendthrift clause in a life insurance policy protect.

The beneficiary

Which is a FALSE statement about the California Insurance Commissioner?

The commissioner is selected by the Governor as an appointee.

What is the written document called in which insurance coverage is set forth

The contract

Which of the following best depicts the law of large numbers?

The larger the pool of risks under study, the more accurate the predictions will be

According to the Common Disaster clause, if the insured and primary beneficiary are killed in the same accident and it cannot be determined, who died first

The primary beneficiary died before the insured

Which of the following entities conducts a post-selection process?

Underwriters

An aleatory contract is based on what kind of exchange

Unequal exchanges of values

Which of the following policies can be described as a flexible premium adjustable life policy

Universal life

A life insurance policy illustration may NOT include

Vanishing premiums if the policy becomes paid up with non guaranteed elements paying future premiums.

Because of an injury, an insured has been unable to work for 7 months. when his life insurance premium came due, he was unable to pay, yet the policy remained in force. the policy includes

Waiver of premium rider.

If the policy summary for a life insurance policy is not given when the application is taken, when must the policy summary be given to the policyowner

When the policy is delivered

A graded premium life insurance policy is modified for of

Whole life

When an insured terminates membership in the insured group, the insured can convert to

Whole life without proof of insurability

An insured has a life insurance policy in the amount of $250,000 naming his wife as beneficiary. Upon his death, his beneficiary decides

Yes, proceeds in excess of face amount are taxable as interest

Among people in the same class and life expectancy, which of the following factors can be used to influence premium rates?

Occupation

A warranty may relate to which of the following

The past the present and the future will

An insured bought an insurance policy that requires him to pay $150 in premiums on the 15th of each month. He then takes an extended vacation and forgets to pay the premium

Grace period

Statistical probabilities of loss for a particular class of insureds is best predicted when the insured group is

Larger

When the owner of a participating whole life policy uses the dividend to provide more life insurance coverage, which of the following dividend options is being used?

Paid up additions

In a non contributory group policy

100% of eligible employees must participate

An agent tells an insured that if he replaces his current insurance policy with a newer one, his dividens will be higher and his premiums will be slightly lower

Twisting

When may a representation be withdrawn by the applicant?

Only before the insurance is in effect

Considering the California Insurance Code's definition of an insurable event, which of the following statements is true?

The more predictable a loss the more insurable it is

What type of insurance would a person select as the most efficient method of paying the outstanding debt on their home in the event of death

Mortgage redemption

the purpose of the Fair Credit Reporting Act is to

Protect consumers against the circulation of inaccurate or obsolete personal or financial information

Which dividend option increases the death benefit?

Paid-up additions

Per the California Insurance Code, the best definitions of "shall" and "may" are

Mandatory and permissive

Which of the following policies would NOT offer a policy loan option?

Term life

All other factors being equal, which of the following premium modes would result in the lowest overall premium

Annual

An applicant may challenge information discovered as a result of an investigative consumer report under which of the following Acts?

Fair Credit Reporting Act

An annuity owner receives the same guaranteed payment every month. What type of annuity is it?

Fixed

California Insurance Code requires all insurers to have a department the sole purpose of which is to investigate possible

Fraudulent claims from insureds

A policy owner no longer needs a life insurance policy and agrees to sell it to a third party for more than its cash value. This type of transaction is called a

Life settlement

All of the following statements about mutual insurance companies are correct EXCEPT

Policy dividends issued by mutual companies are guaranteed and not taxable.

Policies written on a third-party ownership basis are usually written to cover which of the following

Policy owners minor children or business associates

What is the difference between a straight life policy and a 20-pay whole life policy

Premium payment period

In reinsurance, the insurance company that transfers its loss exposure to another insurer is the

Primary insurer

If an agent currently has an inactive license, this means

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

In life insurance, which of the following is NOT required to have an insurable interest in the insured

The beneficiary

The purpose of the california insurance guarantee association is to protect the interests of policyholders and claimants against losses recruiting from the inability

The insurers within the last 10 years held a license in the states in which the persons reside

What is the purpose of the surrender charge in a deferred annuity

To compensate the company for loss of investment value

The notice about policy cancellation delivered to senior consumers must include all of the following information EXCEPT

Explanation of where the premiums have been invested

The owner of a deferred annuity pays $100 in premium one month, and $130 the next month. Which of the following terms best describes this premium payment arrangement?

Flexible premium

The needs approach to calculating the amount of life insurance needed is based on

Predicted needs of a family after the premature death of the insured

Which of the following is NOT true regarding life analysts?

They receive commissions from the insurer

An insurer incorporated under the laws of another state but doing business in this state is considered

Foreign

A married couple purchase a life insurance policy on their newborn baby

Payor benefit

Annuities Certain limit the amount paid by the annuity to a certain fixed

Period or fixed amount.

Variable insurance and variable annuities are regulated by

SEC, FINRA and Departments of Insurance is

If an annuity has a guaranteed minimum interest rate, this means

The interest rate will never drop below the guaranteed minimum

Which of the following would be considered peril

Fire

A policyholder returns the policy to the insurer a week after it is delivered. How much of the premium will be returned to the applicant

100%

Joe, age 63, was disabled and can no longer work. He meets the Social Security definition of total disability. How many work credits

40

A life insurance policy qualifies a Modified Endowment Contract (MEC) if the amount of premium paid exceeds the amount that would have provided paid up insurance in how many years

7 years

What type of insurer uses a formal sharing agreement

Reciprocal Insurers

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

Reports may be sent to anyone who requests one

Which statement about Life Insurance Code and Ethics is NOT true?

Acts of fair and unfair discrimination are prohibited

Which of the following riders pays a beneficiary a death benefit that is double or triple the face amount of the insureds death was cause by an accident as defined in the policy?

An Accidental Death Rider

When agents, brokers, or solicitors handle premiums for an insurer, they are acting in which capacity

As a fiduciary

A statement made by an applicant for insurance that must be true in every respect is considered to be a

Representation

In a replacement situation all of the following are prohibited practices EXCEPT

Borrowing 50% of a policy's cash value to fund a new life insurance contract

Which of the following would be TRUE of both the fixed-period and fixed amount settlement options?

Both guarantee that the principal interest will be fully paid out

A dentist is off work for 4 months due to a disability. His dental assistants salary would be covered by

Business Overhead Insurance

In a variable life insurance policy, all of the following assets are held in the insurance company's general account EXCEPT

Cash surrender values

Which of the following is true of the taxation of cash values in a business life insurance policy

Cash values grow tax deferred.

Which of the following is an example of a physical hazard?

Diabetes

Which of the following is NOT true of the agents implied authority

It is specifically stated in the contract

An insured falls down a flight of stairs and sustains a neck injury that renders him severely disabled. The insured owns a Whole Life policy. Is it possible for the policy to include a Waiver of Const of Insurance rider, and if so, what insurance costs would be waived?

No; it is not possible for this waiver to be included in a whole life policy *The Waiver of Cost of Insurance rider is found in Universal Life policies

Dividends received on participating life insurance policies are

Not taxable because they are a return of unused premiums

Which of the following is NOT a component of an insurance policy premium

Number of beneficiaries

Which of the following is consideration on the part of an insurer

Paying a claim

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

Stock insurers are owned by the shareholders and issue nonparticipating policies

Which of the following is true regarding the selection of a Commissioner of Insurance in California

The Commissioner is elected by the people for a 4 year term

Which of the following statements concerning the Medical Information Bureau is correct ?

The Medical Information Bureau assists underwriters in evaluating and classifying risks

At age 72 individuals is considering applying for MediCal so she can afford her medical bills

The agent cannot allow the applicant to purchase an annuity if after the purchase an annuity if after the purchase, she wouldn't qualify for Medical

The renewable provision allows the policy-owner to renew the coverage at the expiration date

Without evidence of insurability

Federal law makes it illegal for any individual convicted of a crime involving dishonesty or breach of trust to work in the business of insurance affecting interstate commerce

Without receiving written consent from an insurance regulatory authority.

Which of the following best describes the difference between joint life and joint and Survivor annuity payment options

In joint life option, the benefits stop after the first death.

The frequency and the amount of the premium payment are known as what?

Premium mode

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

The number of exposure units

Which of the following will be eligible for a tax sheltered annuity

Public school teachers

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

Purchase of a new home

Js' retirement plan meets all federal requirements and entitles him to certain tax benefits as the owner of the plan. What term best describes J's retirement plan?

Qualified

If a life insurance company uses HIV testing as a part of its underwriting, when must an applicant be notified of the procedure

Prior to performance of the test

An applicant for a disability insurance policy has a heart condition of which they are unaware and therefore they answer no to the question pertaining to heart problems on their application. Their answer is considered to be a

Representation

The insured dies 6 months after the policy issue date. Upon death of the insured, it is determined that the insured made a material misstatement on

Rescind the policy

Which provision may be added to a permanent life policy, at no cost, that insures that the policy will not lapse so long as there is cash value

Automatic Premium Loan Option

Which of the following losses would likely be covered under the Accidental Death rider

Death caused by a head-on collision

Which of the following best describes life annuity with period certain option

It guarantees benefit payments for life of the annuitant for a specified period for the beneficiary

Your client wants to provide a retirement income for his elderly parents

Joint and Survivor

Which of the following will NOT be included in the buyers guide?

Specific information about the policy

Which of the following is a permissible reason for an insurance company to contest payment of a claim based on statements in the application

The application contains material misstatements

Life insurance creates an immediate estate. Which of the following best explains this statement

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

If a retirement plan or annuity is "qualified", this means

It satisfies all requirements of the Internal Revenue Service for favorable tax treatment.

A person has a history of DUIs. To his insurer this presents what type of hazard

Morale

A person has a history of DUIs. To his insurer, this presents what type of hazard

Morale

Underwriters use all of these methods to protect the insurer against adverse selection EXCEPT

Only accepting a small percentage of applicants

Which of the following riders provides for the payment of part of the policy death benefit if the insured is diagnosed with terminal illness that will result

Living needs rider

Which of the following would be TRUE of both the fixed-period and fixed-amount settlement options?

Both guarantee the principal and interest will be fully paid out *Neither the fixed-period nor fixed-amount settlement options guarantee income for the life of the beneficiary; however, they both guarantee that the entire principle and interest will be fully paid out

During the accumulation phase of a fixed annuity, the annuitants interest rate is based on a minimum rate as specified in the contract, or the current interest rate, whichever is

Higher

According to the Fair Credit Reporting Act, all of the following statements are true EXCEPT

If an applicant is declined for an insurance policy, he or she has no right to know what was in the report.

Which statement is an accurate description of life insurance policy dividends

They are not taxable and are not guaranteed

An individual has a $200,000 convertible term life insurance policy. If he chooses he can

Convert to a whole life policy for the same face amount without proof of insurability

An example of an alien insurer doing business in this state is one formed under the laws of

Mexico

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

Taxes as ordinary income

Ten years ago an insured purchased a life insurance policy designed to pay his family $500

Family income policy

An agent delivers a policy to an applicant who pays the initial premium but refuses to submit

Consideration

Under what circumstances will the contingent beneficiary receive the death benefit

If the primary beneficiary dies before the insured

When a whole life policy is surrendered for it's non forfeiture value, what is the automatic option

Extended term

Where are premiums from fixed annuities invested?

general account

A life insurance policy that provides coverage to every family member in a single policy, with permanent insurance on the breadwinner and convertible term on other family members is called

A family policy

If an insured dies and it is discovered that the insured misstates his/her age or gender, the life insurance company will

Adjust the death benefit to what the premium would have purchased at the actual age or gender.

A life settlement broker

Negotiates life settlement contracts between an owner and providers