Primerica Life License
An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer?
$10,000, no tax consequence
Four individuals, each 35 years old, purchase life insurance policies. Which policy will have the largest cash value after 10 years?
20-pay life
Which life insurance policy will provide coverage beyond the end of the premium payment period?
20-pay whole life
Each person licensed as an agent or solicitor is required to complete how many hours of approved continuing education instruction every 2 years?
24
The CE requirement for resident producers licensed in Ohio is
24 hours of CE with a minimum of ethics biennially
An insurance company forwards fixed annuity premiums to their general account, where the money is invested. The guaranteed minimum interest is set at 3%. During an economic downswing, the investments only drew 2.5%. What interest rate will the insurer pay to its policyholders?
3%
Rollover contributions to an IRA must be completed within how many days?
60 days
The tendency of less favorable insurance risks to seek or continue coverage to a greater extent than average risks is called
Adverse selection
What documentation grants express authority to an agent?
Agent's contract with the principal
What is a foreign insurer?
An insurer with a home office in another state
Which of the following provisions in annuity contracts allow the owner to surrender the annuity if interest rates drop to a specified level?
Bail-out
If the insured elects a partial payment from the accelerated or living benefit provision, the death benefit of the life policy will
Be reduced
An insurance producer who by contract is bound to write insurance for only one company or group of companies is classified as a/an
Captive agent.
This is not a duty or responsibility of producers at the time of application
Change any incorrect statement on the application by personally initialing next to the corrected statement.
Any areas of ambiguity in an insurance contract are decided in favor of the insured because
Contract of adhesion
The type of policy that can be changed from one that does not accumulate cash value to the one that does, is a
Convertible Term Policy.
A life policy that is surrendered for its cash value may
Create a taxable event if the cash value is more than the premiums paid
This is not an element of an insurance contract
Estoppel
Which of the following is true regarding examination of financial affairs of insurers?
Examination expenses are the responsibility of the insurer.
An applicant wants to buy a life insurance policy in which he can count on receiving the same benefits as stated in the contract. Which type should he buy?
Fixed
A Universal life policy may also be referred to as a
Flexible premium policy
Which is commonly used for the purpose of paying large settlements such as lottery winnings?
Immediate annuity
What type of insurance would be used to a Return of Premium rider?
Increasing Term
A whole life policy endows when the
Insured reaches age 100
Who makes up the Medical Information Bureau?
Insurers
Not correct about annuities
Interest earned on money paid into an annuity is not taxable when withdrawn
Which of the following is TRUE regarding the annuity period?
It may last for the lifetime of the annuitant.
Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die?
Joint Life
Which can create an immediate estate, regardless of when death occurs?
Life Insurance
In Ohio, all life insurance policy illustrations do not include
Name, age and sex of the insurance producer.
Which of the following best describes gross annual premium
Net premium plus expenses
Which life insurance provision recognizes the equity built up in the early years of a life insurance policy?
Nonforfeiture
Qualified contributions to a Roth IRA are
Not tax deductible
If an insured dies whose policy has a policy loan, what will the insurer do?
Pay the death benefit minus the outstanding loan
Statements made by an applicant on an application for insurance are considered to be
Representations
In Ohio, the written statement that describes all relevant elements of the policy must be titled
Statement of Policy Cost and Benefit Information.
Which of the following is a characteristic of a Reciprocal Insurance Exchange?
The chief administrator of the insurer is called an "attorney-in-fact".
Which of the following statements about group life is correct?
The cost of coverage is based on the ratio of men and women in the group.
What is the advantage of reinstating a policy instead of applying for a new one?
The original age is used for premium determination
In an Adjustable Life policy what can't be changed by the policy owner
The type of investment.
The person who negotiates a viatical settlement contract is a
Viatical settlement broker
The voluntary surrender of a right is known as
Waiver
An insured has a $10,000 term life policy with a $200 annual premium due on February 1. He dies on February 28. How much will the beneficiary receive?
$10,000; less premium due
If a producer violates any regulations of the Insurance Code the Superintendent may assess a civil penalty in an amount not to exceed
$25,000
A policyowner cancels his life policy but instructs the company to transfer the cash value of his policy to an annuity. This nontaxable transaction is called
1035 exchange.
For how long is the certificate of prelicensing course completion valid?
180 calendar days
What is the waiting period for rate filing before each rate may become effective?
30 days
When a producer's appointment is terminated by an insurer, the insurer must notify the Director within
30 days
The Superintendent may issue a temporary producer license for a maximum of
90 days
Which of the following would be sufficient violation to warrant rejection, revocation, or suspension of an insurance agent's license?
A denied license in another state
What produces evaluations of insurers' financial status often used by state departments of insurance?
AM Best
Which dividend option would create a taxable income to the policyowner?
Accumulate at interest
A permanent insurance policy which lets the policyowner select the premium, face amount, or type of coverage (term or whole life) is called
Adjustable life
In Ohio, a temporary license may be issued for reasons EXCEPT
Agent's retirement.
Which of the following would be deducted from the death benefit paid to a beneficiary, if a partial accelerated death benefit had been paid while the insured was still alive?
Amount paid with the accelerated benefit, plus the earnings lost by the insurance company in interest income from the accelerated benefit
Who can make a fully deductible contribution to a traditional IRA?
An individual not covered by an employer-sponsored plan who has earned income
If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered
An unfair trade practice.
The life insurance portion of a Universal policy is ALWAYS what type of insurance?
Annual renewable term
All other factors being equal, the least expensive first-year premium payment is found in
Annually Renewable Term.
The annuity income amount is based on whose life in an immediate annuity?
Annuitant
When an annuity is written, whose life expectancy is taken into account?
Annuitant
Before an insurer can request medical information about an applicant, what must they have in writing?
Applicant's consent
In Ohio, the Superintendent of the Department of Insurance is
Appointed by the Governor
What limits the amount that a policyowner may borrow from a whole life insurance policy?
Cash value
Whole life insurance differs from term insurance with regard to
Cash value accumulation
If a straight life policy is surrendered within 3 years from the issue date, the
Cash value is less than premium paid
A producer represents the
Company
This cannot be used in the underwriting process of a life application
Country of Origin
A field underwriter is NOT responsible for
Determining the risk classification of the proposed insured
What are the three nonforfeiture values
Extended term, reduced paid-up, cash
The federal law that permits an applicant for insurance to question the validity and source of any credit information is called the
Fair Credit Reporting Act
An insurance producer's obligation to act in an insurance applicant's best interest, based on the faith and trust in the public, is known as
Fiduciary Duty
If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select?
Fixed period
Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid
For 20 years or until death, whichever occurs first.
Life insurance death proceeds are
Generally not taxed as income.
Which of the following will receive the death benefit if the insured and the primary beneficiary die in a common disaster?
Insured's estate
In a case where the primary beneficiary predeceases the insured, in the event of the insured's death, the death benefit proceeds will be paid to
Insurer's guaranteed minimum rate of interest
This is not true concerning the federal tax treatment of life insurance benefits
Interest earned on the death benefit is not taxable
Upon policy owner's death, policy will pay portion of proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policy owner choose?
Interest only option
An underwriter may obtain information on an applicants character, general reputation, and personal habits by ordering a
Investigative Consumer Report
Which of the following is true about the 10-day-free-look privilege?
It starts when the policy is delivered
Which is not a requirement for the reinstatement of a life insurance policy?
Make a collateral assignment of the cash value in the policy to the insurance company
A nonprofit organization that was founded by insurance companies to collect and maintain data on applicants and insureds is called the
Medical Information Bureau (MIB)
If a producer misleads or fails to adequately disclose the title and true nature of a policy offered to potential insureds, this may be considered
Misrepresentation
An insured states her age as 40 on the application. When she dies, the insurer discovers that she was actually only 37 at the time of application. What will the insurance company do?
Pay the death benefit in the amount that the premium at the correct age would have purchased
What is NOT true about a joint and survivor annuity benefit option?
Payments stop after the first death among the annuitants.
What allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?
Payor Benefit
In a policy insuring the life of a child, what allows the premiums to be waived in the event of the death or disability of the person responsible for premium payments?
Payor provision
IS true about a participating life insurance policy?
Pays dividends to policyowners.
NOT a characteristic of group life insurance
Premiums are determined by the age, sex and occupation of each individual certificate holder.
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?
Proof of insurability is not required.
In determining life insurance risks, an underwriter may classify risks as any of the following except
Prorated
Who is a person, other than the viator, that enters into a viatical settlement contract?
Provider
The annuity period is best described as the time during which the annuitant
Receives payment
Which annuity payout systems guarantees the return of at least all of the principal invested in the policy?
Refund life annuity
An insured will be allowed to reactivate her lapsed life policy if action is taken within a certain period and proof of insurability is provided. This is
Reinstatement provision
The beneficiary designation which allows the owner to retain all rights of ownership is a
Revocable Beneficiary
Adverse selection is a concept best described as
Risks with higher probability of loss seeking insurance more often than other risks.
A type of insurance company that pays dividends to stockholders is a
Stock Company
J transferred his life policy to his son two years before his death. Which of the following is true?
The entire face value of the policy will be included in J's taxable estate.
M receives monthly payments from her deceased husband's life insurance policy where he chose the fixed amount installation option. Each payment consists of principal and interest. How is the income taxed?
The interest portion is taxed, the principal is not
What is true concerning irrevocable beneficiaries?
They can be changed only with the written consent of that beneficiary.
What is the purpose of establishing the target premium for a universal life policy?
To keep the policy in force
Which doesn't allow contributions after age 70 1/2?
Traditional IRA
A person buying life insurance is demonstrating what method of handling risk?
Transferring the risk
In which policy is partial surrender permissible?
Universal Life
The Waiver of Cost of Insurance rider is found in what type of insurance?
Universal Life
Anyone engaged in the business of insurance whose activities affect interstate commerce, and who knowingly makes false material statements may be fined and imprisoned
10 years
If an annuitant withdraws savings from a qualified plan prior to age 59 1/2 the tax penalty is
10%
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?
50% tax on the amount not distributed as required
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 owner pay?
50% tax on the amount not distributed as required
Traditional individual retirement account (IRA) withdrawals are generally subject to a tax penalty if the distribution is made before age
59 1/2
Individuals purchase a single premium, immediate annuity and chooses the straight life pay-out option. Assuming the same interest rate, who would receive the largest check each month?
A 60-year-old man
A beneficiary not specifically name but is named as "my children" is
A class designation
The term "illustration" in a life insurance policy refers to
A presentation of nonguaranteed elements of a policy.
When transacting business in this state an insurer formed under the laws of another country is known as a/an
Alien insurer.
This is not appropriate for a 1035 exchange?
Annuity to a life policy
Who is an insurance agent?
Any person licensed to sell, solicit or negotiate insurance
An agent accepts the premium payment 35 days after it is due, telling the insured that there will not be a problem keeping the policy in force. This is an example of what type of agent authority?
Apparent
What is the authority agents have because of actions they take and impressions they give to the client?
Apparent authority
The main source of underwriting information for an insurer is the
Application
In Ohio, if a life insurance policy has a free look period of at least 10 days, what is the last time that the buyer's guide and policy summary may be given to the policy owner?
At the time of policy delivery
If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered to be
Authorized.
Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium?
Automatic premium loan
In reference to fixed annuities, what comprises most of a life insurance company's general account?
Conservative investments like bonds
Which would NOT constitute replacement?
Converting term insurance within the same company
What is not a term for a period of time during which the annuitant or beneficiary receives income?
Depreciation period
The consideration clause found in a life insurance contract refers to
Exchange of something of value by both parties
What is the advantage of having a qualified annuity?
Favorable tax treatment
What required provision protects against unintentional lapse of the policy?
Grace period
The automatic premium loan provision is activated at the end of the
Grace period.
What insurance concept is associated with the names Weiss and Fitch?
Guides describing company financial integrity
Upon the submission of a death claim under a life insurance policy, when should the insurer pay the policy benefit?
Immediately after receiving written proof of loss
At the death of the owner, the value of an annuity is
Included in the owner's estate if there is no beneficiary named
The life policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the
Incontestable clause
An insured has a life insurance policy with a face amount of $500. He pays a premium each week to the agent who sold him the policy. What kind of policy does the insured have?
Industrial life
Which settlement option is considered to be a temporary option?
Interest only
An equity-indexed annuity is NOT characterized by this
Invests in riskier assessments like mutual funds
Why is an equity indexed annuity considered to be a fixed annuity?
It has a guaranteed minimum interest rate.
This is a true statement about the human life value approach of determining life insurance needs?
It is based on the earning potential of an insured over a period of future years
Which of the following best describes annually renewable term insurance?
It is level term insurance.
If an insured surrenders his life policy, which statement is true regarding the cash value of the policy?
It is only taxable if the cash value exceeds the amount paid for premiums.
Which of the following statements about the reinstatement provision is true?
It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated.
A couple near retirement is planning for their golden years. They want to make sure that their retirement annuity provides monthly benefits for the rest of their lives. Should one of them die, the other would still like to continue receiving benefits. Which settlement option should they choose?
Joint and Survivor
A whole life insurance policy in which the cash value builds faster than a 7-PAY whole life policy is called a
Modified endowment contract
Which of the following is NOT true regarding policy loans?
Money borrowed from the cash value is taxable.
A person who does not lock the doors or does not repair leaks shows an indifferent attitude. This person presents what type of hazard?
Morale
Regarding the free-look provision, the insurance company
Must allow the policyowner to return the policy for a full refund.
A prospective deferred annuity owner is concerned about what would happen if he surrendered the annuity before the annuitization period. The agent most likely explained which of the following?
Nonforfeiture option guarantees that the owner will receive a surrender value of the contract.
An insured had paid only part of her total number of IRA premiums before she died. What effect will this have on the insured's estate?
Only the premiums paid will be included in the estate.
An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do?
Pay a reduced death benefit
An insured purchases a policy in 2008 and died in 2013. The insurance company discovers at that time that the insured concealed information during the application process. What can they do?
Pay the death benefit
An agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. The agent is guilty of
Rebating.
Giving a client an inducement to a sale not stated in the policy is an unlawful practice known as
Rebating.
B has used the cash value of her whole life policy to change to a policy that will require no further premium payments. The death benefit of this policy is not as large as her original policy but the new policy will still endow at age 100. Which nonforfeiture option has B chosen?
Reduced paid-up option
All of these are factors that could affect an insured's premium
Risk classification, premium payment mode, insurance company expenses
If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a
Settlement option.
An employee has group life insurance through her employer. After 5 years, she decides to leave the company and work independently. How can she obtain an individual policy?
She can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan.
An applicant buys a nonqualified annuity but dies before the starting date. For which of the following beneficiaries would the contract's interest NOT be taxable?
Spouse
An equity indexed annuity would have a minimum guaranteed interest rate, but may have a higher rate of return based upon the
Standard and Poor's 500 stock index
When delivering a non-prepaid policy, insurance companies require agents to collect the first premium and to have the insureds sign a document indicating that their physical condition has not changed since the policy application was taken. This document is called a
Statement of continued good health
Which settlement option would provide the beneficiary with the largest monthly income from a life insurance death benefit?
Straight Life Income
An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-year term?
The insured may renew the policy for another 10 years, but at a higher premium rate.
An insured stops making payments on a loan taken from his cash value policy. What will most likely happen?
The policy will terminate when the loan amount with interest equals or exceeds the cash value.
A group of 15 skydivers met at a seminar and began talking about life insurance during a break. Because it was expensive to get individual life insurance, they decided to band together to form a small group so that they could qualify for group life insurance. After they applied for group life insurance, they were rejected. Why?
The purpose of the group was to purchase life insurance.
A deferred annuity is surrendered prior to annuitization. Which of the following best describes the nonforfeiture value of the annuity?
The surrender value should be equal to 100% of the premium paid, minus any prior withdrawals and surrender charges.
What is the exclusion ratio used to determine?
The untaxed portion of distributions
This does not apply to the waiver of premium provision
There is no charge for this provision
All of the following are true regarding the guaranteed insurability rider EXCEPT
This rider is available to all insureds with no additional premium.
What is the purpose of a disclosure statement in life insurance policies?
To explain features and benefits of a proposed policy to the consumer
An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have?
Universal life
A family term rider is best described as
Whole life on the insured, level and convertible term on the spouse and children
Insurance producers and other licensees are required to notify the Director of any change in their business name or address
Within 30 days
Dividends from a participating policy are considered a return of excess premiums and are
not taxable
Each violation of the Superintendent's cease and desist order will be subject to a civil penalty of not more than
$10,000
If an insured receives accelerated death benefits, what is the least amount of the original death benefit that the beneficiary would receive after the insured's death?
0%
An annuitant has a life annuity with a 10-yr period certain. He begins to receive benefits and dies 4 years later. The beneficiary will receive
6 years of monthly benefit payment
Which of the following is a true comparison between annuities and life insurance?
Both annuities and life insurance use mortality tables.
The Director of insurance cannot
Change the insurance laws and statutes
Clause that describes the method pf paying the death benefit in the event that the insured and beneficiary are both killed in the same accident?
Common Disaster Clause
NOT an appropriate use of a deferred annuity?
Creating an estate
The surrender charge on a deferred annuity is stated as a
Declining percentage over time
Which provision of a life insurance policy states that the application is part of the contract
Entire contract
When a policy is cancelled the insured has selected the extended term nonforfeiture option, the cash value will be used to purchase term insurance that has a face amount
Equal to the original policy for as long a period of time that the cash values will purchase.
What are the primary factors that are used in determining premiums?
Expense, Interest, and Gross Premium
An insured has a Modified Endowment Contract. He wants to withdraw some money in order to pay medical bills. Which of the following is true?
He will have to pay a penalty if he is younger than 59½.
Which authority is NOT stated in an agent's contract but is required for the agent to conduct business?
Implied
Which type of policy covers 2 or more lives and pays the death benefit when the first insured dies?
Joint life
If a life insurance policy increases significantly in face amount (death benefit) when the insured reaches a specified age, what type of policy is this?
Jumping juvenile policy
B applies for an insurance policy on July 14, pays the first premium, and receives a conditional receipt. The agent arranges a physical on July 20, and the policy is approved by the home office on August 18. On August 21 the agent delivers the policy. When Did B's coverage start?
July 20
Which of the following payout options pays a specified amount to the annuitant with no residual value payable to a beneficiary?
Life only
J chooses the life-income option for his annuity and receives monthly payments for 10-months when he suddenly dies. What happens to the rest of his annuity payments?
Payments will stop
The cause of potential loss is a
Peril
Who might receive dividends from a mutual insurer?
Policyholders
All of the following are characteristics of group life insurance EXCEPT
Premiums are determined by the age, sex and occupation of each individual certificate holder.
If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may
Require evidence of insurability.
Lump sum death benefits paid to a beneficiary from a life insurance policy are
Tax free
The growth in a corporate owned annuity is
Taxable as earned income each year
As the cash value grows in a whole life policy, the growth is
Taxable only if there is a gain upon surrender
Which of the following is an example of apparent authority of an agent appointed by an insurer?
The agent accepts a premium payment after the end of the grace period.
An individual wants to purchase a life insurance policy. His agent asks if the transaction will involve replacing any existing life insurance policies. If the customer replies, "Yes," which of the following best describes the agent's next step?
The agent must provide a replacement notice to the applicant.
J transferred his life insurance policy to his son two years before his death. Which of the following is true?
The entire face value of the policy will be included in J's taxable estate.
Which type of misrepresentation persuades an insured, to his or her detriment, to cancel, lapse, or switch policies from one to another?
Twisting
An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy?
Guaranteed insurability option
Under what circumstances may a life insurance agent deliver a policy that is dated up to 3 months before the application was taken?
To avoid an increase in premium rate for the insured
When must an IRA be completely distributed when a beneficiary is not named?
December 31 of the year that contains the fifth anniversary of the owner's death.
What are unfair trade practices
Illegal inducement, misrepresentation, and fraud.