Stimulation Exam-Missed

An adjustable life policy can assume the form of..

Either term insurance or permanent insurance.

The reduction of premium option uses the dividend to reduce..

NEXT YEAR's premium.

Stranger-oriented life insurance policies are in direct opposition to the principal of..

Insurable interest

Equity Indexed Annuities are NOT..

Securities

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then..

The benefit is received tax free.

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

What type of annuity activity will cause immediate taxation of the interest earned?

Surrendering the annuity for cash.

The "Bonus Plan" is also called the:

"Thrift" Plan

An insurance company cannot transact insurance until it obtains a..

Certificate of Authority

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

3 days

The term "illustration" in a life insurance policy refers to:

A presentation of nonguaranteed elements of a policy.

Which of the following insurance principals states that ambiguities in a policy will always be construed in favor of the insured?

Adhesion

Under the 401(k) bonus or thrift plan, the employer will contribute..

An undetermined percentage for each dollar contributed by the employee.

Variable life insurance is regulated by..

BOTH state and federal government, as well as the Insurance Department and the SEC.

Which of the following best describes fixed-period settlement option?

Both the principal and interest will be liquidated over a selected period of time.

Variable life insurance is regulated by:

Both the state and federal government, as well as the Insurance Department, and the SEC.

Forcing a client to buy insurance from a particular lender as a condition of granting a loan is defined as:

Coercion

An insured can transfer an insurance contract to another person, but he or she must..

First obtain the written consent of the insurer.

Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation?

Human Life Approach

A policyowner who is also the insured wants to name her husband as the beneficiary of her life insurance policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the..

Revocable Beneficiary

Who may contribute to an HR-10 plan?

Self-employed plumber

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

Traditional IRA contributions are..

TAX DEDUCTIBLE

In forming an insurance contract, when does the acceptance usually occur?

When an insurer's underwriter approves coverage.

How often must an insurance agency notify the Director of the appointment of a producer?

Annually

In an annuity, the accumulated money is converted into a stream of income during which time period?

Annuitization period

Insurable risks include the following characteristics:

Due to chance, Definite and measurable, Statistically predictable, Not catastrophic, and Randomly selected and large loss exposure.

When a life insurance policy is cancelled and 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.

If an annuitant dies before annuitization occurs, what will the beneficiary receive?

Either the amount paid into the plan or the cash value, whichever is the greater amount.

They have a guaranteed minimum interest rate. This is true for both..

Equity Indexed Annuities and Fixed Annuities

An agent selling variable annuities must be registered with

FINRA

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

It provides the highest monthly benefit.

Which of the following statements is TRUE concerning the Accidental Death Rider?

It will pay DOUBLE or TRIPLE the FACE AMOUNT.

What is the term for cash payment settlement option?

Lump Sum

A group life insurance is converted to an individual policy. The insured is eligible for individual life insurance coverage without any evidence of insurability. Within how many days of the first premium must the insurer notify the insured of his eligibility?

15 days

If a consumer request additional information concerning an investigation consumer report, how long does the insurer or reporting agency have to comply?

5 days

Generally, IRA rollovers must be completed within __days from the time the money is taken out of the first plan.

60 days

some deferred annuities include an adjustment that subjects the owner of the annuity to share in all loss or gain due to premature liquidation of bonds. This feature is found in:

A Market Value Adjusted Annuity

The Medical Information Bureau (MIB) is:

A nonprofit trade organization which receives adverse medical information from insurance companies and maintains confidential medical impairment information on individuals.

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. (It is an unfair trade practice to make any statement that an insurer's policies are guaranteed by the existence of the Insurance Guaranty Association. Though it is illegal to advertise, the statement is still true and would not be considered a misrepresentation.)

Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?

Any form of life insurance (Any form of life insurance may be used to fund a buy-sell agreement)

Because an agent is using stationery with the logo of an insurance company, applicant for insurance assume the agent is authorized to transact on behalf of that insurer. What type of agent authority does this describe?

Apparent

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

Both guarantee that the principal and interest will be fully paid out.

Examples of Risk Retention:

Deductibles, copayments, and self-insurance

In a SEP (Simplified Employee Pension), an employee..

Establishes and maintains an individual retirement account to which the employer contributes. Employer contributions are NOT included in the employee's GROSS income.

J applied for a life insurance policy on January 10. The policy was issued on January 31. J's agent was vacationing at the time the policy was issued, so J did nto receive the policy until February 18. J decides that he does not want the policy. When would J need to return the policy to the insurer in order to receive a full refund of premium paid?

February 28th, or 10 days after the time the policy was delivered.

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

A married couples retirement annuity pays them $250 per month. The husband dies and his wife continues to receive $125.50 per month for as long as she lives. When the wife dies, payments stop. What settlement option did they select?

Joint and Survivor

While many policies provide a level death benefit, __ policies provide a low face amount in the early years and then increase, usually by 5 times the amount, when the insured reaches an age specified in the policy (usually age 21).

Jumping Juvenile

A spouse term rider (just like any other insured rider) is usually..

Level Term Insurance

Fixed PERIOD annuity settlement options do not have..

Life contingencies.

During a sale presentation a producer intentionally makes a statement which may mislead the insurance applicant. This describes..

Misrepresentation

__ gives rise to immediate taxation of the interest earned.

One-sum cash surrenders

Which of the following can surrender a deferred annuity contract?

Only the annuitant owner.

Qualified plans must be..

PERMANENT

The pure life annuity..

Pays the most since its only guarantees to pay for the rest of one's life without a minimum guarantee.

An Equity Indexed Annuity will grow based upon..

Performance of a recognized index.

Fixed-period installments are also called:

Period Certain

Which of the following statements is an accurate comparison between private and government insurers?

Private insurers may be authorized to transact insurance by state insurance departments.

The policyowner may change a __ designation at any time without the consent of the beneficiary.

Recovable

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

Reduced paid-up

The following are features of the Indexed Universal Life EXCEPT:

Sale of this product requires a securities license. (Indexed Universal Life policies have name of the same features as the Universal Life: flexible premiums, adjustable death benefits, and an investment component. However, the policy's cash value is dependent upon the performance of the equity index. Sale of the Indexed Universal Life Products does not require a securities license.)

S set up an individual retirement account that her employer is now contributing to. Her employer's contributions are not included in her gross income. What kind of retirement plan does S have?

Simplified Employee Pension (SEP)

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.

Which of the following is an example of liquidity in a life insurance contract?

The cash value available to the policyowner.

An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date?

The date of medical exam.

With an Adjustable Life, the owner can change all of the following except:

The insured

An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible?

The insured will need a written consent of the insurer.

Under Joint and Survivor Settlement, payments..

Would continue until BOTH recipients die. Usually, the surviving beneficiary receives 1/2 or 2/3 of the amount received when both beneficiaries were alive.

If a life insurance policy is purchased by someone who has no insurable interest in the insured, it is considered..

a STOLI policy

AM Best & Company..

Assigns ratings to life, property, and casualty insurance companies based upon the financial stability of the insurer.

A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will..

Pay the policy proceeds only it would have issued the policy.

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 deferred annuity is surrendered prematurely, a surrender charge is imposed. How is the surrender charge determined?

The surrender charge is a percentage of the cash value and decreases over time.

If a producer allows his license to lapse, within what maximum time period may the same license be reinstated?

12 months

An employee must be notified at least how many days before the start of a safe harbor 401(k) plan year?

30 days

The Director denies an application, and the applicant requests a hearing to contest the decision 25 days later. Within how many days must the hearing occur?

30 days

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

Mexico

With the interest only option, the insurance company..

Retains the policy proceeds and pays interest on the proceeds to the recipient (beneficiary) at regular intervals.

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

Retention

Why should the producer personally deliver the policy when the first premium has already been paid?

To help the insured understand all aspects of the contract.

Market Value Adjusted Annuities subject the owner:

To share in the loss or gain when bonds must be prematurely surrendered.

In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe?

Unilateral

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.

Beneficiaries that have a vested interest in the policy, so the policyowner may not be able to exercise certain rights without their consent.

Irrevocable

In a unilateral contract, the insured..

Is NOT legally bound to do anything.

Which of the following best describes the MIB?

It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance.

Waiver

The voluntary relinquishment of a known legal right

For how many years is the Director appointed?

There is not a set limit.

Sale of the Indexed Universal Life Products does NOT require..

A security license

With the paid-up option, the insurer can..

Accumulate dividends at interest and then use them, in addition to interest and the policy's cash value, to pay the policy earlier than planned. (This is different than paid-up additions, in which the dividends are used to buy additional policies that increase the face amount of the original policy).

A producer who fails to segregate premium monies from his own personal funds is guilty of..

Commingling

An insurer neglect to pay a legitmate claim that is covered under the terms of the policy. Which of the following insurance principals has the insurer violated?

Consideration

Under the Bonus or Thrift plan, the employer will..

Contribute certain amount or percentage for each dollar contributed by the employee. There is no specific rule as to how much the employer must contribute.

A long stretch of national economic hardship causes a 7% inflation. A policyowner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider cause this change?

Cost of Living Rider (NOT inflation rider)

Company advertises directly to consumers through mail, internet, television, and other mass marketing.

Direct Response Marketing System

An insurance company sells an insurance policy over the phone in response to a TV ad. Which of the following best descries this act?

Direct response marketing.

Qualified plans cannot..

Discriminate in favor of the "prohibited group".

Equity Indexed annuities seek..

Higher Returns

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

If there is a transfer for value.

What is the purpose of a Buyer's Guide?

To allow the consumer to compare the costs of different policies.

Who would be insured under a COLI policy?

ALL employees

Policy loans may be repaid..

AT ANY TIME.

Which of the following terms is used to define the period of time during which an annuitant makes payments into an annuity?

Accumulation period

To ensure suitability of annuity products, producers must obtain relevant information about the CONSUMER's..

Age, income, financial status, financial experience and objectives. (Beneficiary's age is NOT a suitability factor).

A settlement option is exercised when..

An immediate annuity is purchased with the FACE AMOUNT at death or with CASH VALUE at surrender.

Group Life Insurance: Coverage is based on..

The ratio of men and women in the group.

Joint Life Annuity Settlement Option pays..

Benefits of two or more annuitants, but stops upon the death of the first.

If an insured changes his payment plan from monthly to annually, what happens to the total premium?

Decreases (Because the insurer would have the entire premium to invest for a full year, they would reduce the premium amount)

Individuals who are not covered by an employer-sponsored plan may..

Deduct the amount of their IRA contributions regardless of their income level.

Which of the following has an Insurance Fraud Prevention Department?

Department of Insurance

Key Person coverage may be..

Funded by ANY type of life insurance.

Which authority is NOT stated in an agent's contract but is required for the agent to conduct business?

Implied

All advertisements are the responsibility of the:

Insurer

Life insurance can provide the funds necessary for the survivors of the insured to be able to maintain their lifestyle in the event of the insured's death. This is called:

Survivor Protection

All of the following would be different between qualified and nonqualified retirement plans except:

Taxation accumulation (Taxation accumulation is deferred in both types of plans.)

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

Taxed as ordinary income

In a fixed annuity, which of the following is true regarding the guaranteed interest rate on the investment?

The annuitant will receive the higher of either the guaranteed minimum rate or current rate.

Which of the following is an example of liquidity in a life insurance contact?

The cash value available to the policyowner.

The "accumulation period" is:

The period of time over which the annuity owner makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred (which would be the case in a deferred annuity).

Under the fixed-period installments option..

A specified period of years is selected, and equal installments are paid to the recipient. The payments will continue for the specified period even if the recipient dies before the end of that period.

All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT:

The policy is owned by the company. (The policy is owned by the employee)

How are contributions to a tax-sheltered annuity treated with regards to taxation?

They are not included as income for the employee, but are taxable upon distribution.

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

To compensate the company for loss of investment value.

Any distributions from MECs are taxable, including..

Withdrawals and policy loans.

Which of the following describes the taxation of an annuity when money is withdrawn during the accumulation phase?

Withdrawn amounts are taxed on a LAST IN, FIRST OUT basis.

Your client's employer does not offer a company-wide annuity contract. What type of annuity contract could your client obtain?

Individual

Insurance companies incorporated in territorial possessions, such as, ___, are considered foreign.

Puerto Rico

What is the penalty for IRA distributions that are below the required minimum for the year?

50%

An IRA used 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.

Who can make fully deductible contributions to a traditional IRA?

An individual not covered by an employer-sponsored plan who has earned income.

According to the terms of the policy or an arrangement between the insured, the group policyholder, and the insurer, the insured person may not do which of the following?

Assign an appropriate premium based on preferences.

All of the following are TRUE of the federal tax advantages of a qualified plan EXCEPT:

At distribution, all amounts received by the employee are tax free. (Funds in a qualified plan accumulate on a tax-deferred basis; however, at distribution any amount received by the employee will be treated as ordinary income for tax purposes.)

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

Cash Option

Estoppel

Consequence of waiver

In reference to fixed annuities, what comprises most of a life insurance company's general account?

Conservation investments like bonds.

According to the entire contract provision, what document must be made part of the insurance policy?

Copy of the original application.

All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT:

Dividends from a mutual insurer. (Dividends paid to policyholders of a mutual insurer are not considered to be a rebate because the policy specifies that they might be paid).

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

Universal Life

A Certificate of Authority in Nebraska must be renewed on what kind of basis?

Annual

Which of the following types of agent authority is also called "perceived authority"?

Apparent

According to the terms of the policy or an agreement between the insured, the group policyholder, and the insurer, the insured person may..

Assign all or a part of ownership, exercise the conversion privilege, and reserve the right to name a beneficiary.

An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies, and habits. What type of a report is that?

Inspection Report

A personal insurance contract is written between an __ and an __ and the __ has a right to decide whome it will and will not to business.

Insurance Company and Individual; Insurance Company.

The policy owner wants to make sure that upon his death, the life policy will pay a portion of the 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 policyowner choose?

Interest only option

If a life insurance policy develops cash value faster than a seven-pay whole life contract, it becomes a/an..

MODIFIED endowment contract.

Inspection Reports cover..

Moral and financial information regarding a potential insured, usually supplied by private investigators and credit agencies.

Money borrowed from the cash value is..

NOT TAXABLE.

Which of the following documents must be provided to the policyowner or applicant during policy replacement?

Notice Regarding Replacement

The act that set the standards for advice given by insurance producers regarding annuities is known as the Nebraska..

Protection in Annuity Transaction Act

Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance?

Replacement Rule (Anytime a new policy is issued that replaces or modifies existing insurance, a replacement form must be submitted to the ceding company).

Under an extended term nonforfeiture option, the policy cash value is converted to:

The same face amount as in the whole life policy.

All of the following are true regarding a decreasing term policy EXCEPT:

The payable premium amount steadily declines throughout the duration of the contract. (Premiums remain level with a decreasing term policy; only the FACE AMOUNT decreases)

All of the following statements are true regarding installments for a fixed amount except:

The payments will stop when the annuitant dies. (Installments for a fixed amount option has NO life contingencies. A specific amount of benefits will be paid until funds are exhausted whether or not the annuitant is living)

Which of the following describes the tax advantage of a qualified retirement plan?

The earnings in the plan accumulate tax deferred.

The Buyer's Guide provides:

Generic info about life insurance policies and allows the consumer to compare the costs of different policies.

What is the purpose of establishing the target premium for a universal life policy?

To keep the policy in force.

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

The Federal Fair Credit Reporting Act..

Regulated consumer reports.

Should any key person die, the benefit is treated as a..

Reimbursement

An individual purchased a $100,000 Joint Life policy on himself and his wife. Eight years later, he died in an automobile accident. How much will his wife receive from the policy?

$100,000

If an annuitant dies during the accumulation period, what benefit (if any) will be included in the annuitant's estate?

Accumulated cash value (If the annuitant died during the accumulation period, the insurer is obligated to return all or a portion of the annuity cash value, which will be included in the deceased annuitant's estate.)

If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, an if a notice of insurance information practice has been provided, the report may contain all of the following information EXCEPT the applicant's..

Ancenstry

It may last for the lifetime of the annuitant..

Annuity Period

Equity indexed annuities..

Are more risky than variable annuities.

It is legal for a person convicted of felony to..

Buy an insurance contract.

What insurance concept is associated with the names Weiss and Fitch?

Guides describing company financial integrity

Type of Marketing Arrangments:

Independent/American Agency System; Exclusive Agency System/Captive Agents; General Agency Systems; Managerial System; and Direct Response Marketing System

Group contracts can be obtained through an employer. If that option is not available, individuals can obtain an __ annuity.

Individual

What is the purpose of a conditional receipt?

It is intended to provide coverage on a date earlier than the date of issuance of the policy.

An insurer invests money it receives from premiums paid by its insureds. Which of the following is TRUE regarding the interest earned on these investments?

It is used to lower premiums.

A couple receives a set amount of income for their annuity. When the wife dies, the husband no longer receives annuity payments. What type of annuity did the couple buy?

Joint Life

If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insured, it is called a:

Joint Life Annuity

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

Joint Life has a lower premium than the total of the two individual policies.

A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as

Survivor Protection

Which of the following statements is true regarding thrift plans?

The employer contributes a certain amount of each dollar contributed by the employee.

Pure Life Annuities provide..

The highest monthly payments

If an applicant for an insurance license is likely to earn an aggregate amount in commissions that would exceed 30% of the aggregate amount represented by all other insurance business that would be procured through the applicant, which of the following would most likely happen?

The license would not be granted.

The "annuity period" is:

The time during which accumulated money is converted into an income stream. It may last for the lifetime of the annuitant or for a SHORTER specified period of time depending on the benefit payment option selected.

Which type of life insurance policy allows the policyowner to pay more or less than the planned premium?

Universal Life

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

Variable whole life

Employer contributions made to a qualified plan are subject to..

Vesting requirements

The ___ rider is found in Universal Life Policies..NOT WHOLE LIFE.

Waiver of Cost

IRA Rollovers: If the distribution from the first plan is paid directly to the participant, __% of the distributions must be withheld by the payor.

20%

An Internal Revenue Code provision that specifically provides for an individual retirement plan for public school teachers is a(n)..

403(b) Plan (TSA) (Under the 403(b) Plan, tax-sheltered annuities may be established for the employees for specified nonprofit charitable, educational, religious and other 501c(3) organizations, including teachers in public school systems. Such plans generally are not available to other kinds of employees.

If an annuitant dies during the accumulation period, what benefit (if any) will be included in the annuitant's estate?

Accumulated cash value

The "annuity period" is the time during which..

Accumulated money is converted into an income stream.

A couple owns a life insurance policy with a Children's Term Rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability?

Proof of insurability is NOT required.

Which type of retirement account allows contributions to continue beyond age 70 1/2 and does not force distributions to start at age 70 1/2?

ROTH IRA

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?

The death benefit can be increased by providing evidence of insurability.