Tennessee Life Insurance
premiums collected on behalf of the insurance company by an agent will be held in what capacity?
fiduciary
collateral assignment
involves a transfer of partial rights to another person
absolute assignment
involves transferring all rights of ownership to another person or entity
Any person acting as an insurance producer without a valid license may be fined up to
$1000 for each violation
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%
Upon receipt of notice of appointment, the Commissioner must verify the insurance producer is eligible for appointment within how many days?
30 days-The Commissioner must verify eligibility within 30 days.
when an employee terminates coverage under a group insurance policy, coverage continues in force for
31 days, employee has that long under the conversion privilege to convert to individual policy
consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agent have to comply?
5 days
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
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.
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 a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT
Erase the incorrect answer and record the correct answer.-An agent should not use white-out, erase or obliterate any answers given to a question on an application. It could prevent an insurer from contesting the application, should it be necessary.
All of the following entities regulate variable life policies EXCEPT
Guaranty Association
plans must meet the general requirements established by the
IRS
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.
What is a definition of a unilateral contract?
One-sided; only one party makes an enforceable promise
Which is the appropriate action by the insurer if a prospective insured submitted an incomplete application?
Return the application to the applicant for completion
variable insurance and variable annuities are regulated by
SEC, FINRA, and Departments of Insurance
Which is NOT true about beneficiary designations?
The beneficiary must have insurable interest in the insured.-A beneficiary is the person or interest to whom the policy proceeds will be paid upon the death of the insured. Beneficiaries do not have to have an insurable interest in the policyholder.
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.
Which of the following determines the cash value of a variable life policy?
The performance of the policy portfolio
closest term to an authorized insurer?
admitted
death occurs within the mandatory 30 day grace period,
past due premium will be subtracted from the face amount of the policy
All of the following are characteristics of a Universal Life policy EXCEPT
The planned premium pays for mortality charges and expenses and any excess is returned to the policyowner.
All of the following are true regarding the guaranteed insurability rider EXCEPT
This rider is available to all insureds with no additional premium.
All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT
Upon conversion, the death benefit of the permanent policy will be reduced by 50%.
Which of the following is another term for the accumulation period of an annuity?
pay-in period
If a life insurance policy develops cash value faster than a seven-pay whole life contract, it is
a modified endowment contract
evidence obtained by the commissioner may NOT be used in
a private civil proceeding against an agency or producer
Option B
allows the beneficiary to collect both the death benefit and cash value upon death of insured
guaranteed insurability option
allows the insured to purchase specific amounts of additional insurance at specific times without proving insurability
which of the following will be stated in the consideration clause of a life insurance policy?
amount of premium payment
a participant in a 401k plan takes a distribution and rolls it over to an IRA within 60 days. which of the following is true?
amount of the distribution is reduced by the amount of a 20% withholding tax
true regarding variable annuities
annuitant assumes the risk on investment
annuitant cannot be the same person as the
annuity owner
modified endowment contract
any cash value life insurance policy that develops cash value faster than a seven-pay whole life contract
feature of variable annuity
benefit payment amounts are not guaranteed
Children's Term rider
children can be covered under the policy until they reach the maximum age stated in the policy. at that point they can convert their coverage to a new policy without having to issue proof of insurability
life insurance is unique in that it could perform the function of
cash accumulation because cash values are available in whole life policies
An insured receives an annual life insurance dividend check. What term best describes this arrangement?
cash option
insured receives an annual insurance dividend check
cash option
which of the following features of the indexed whole life policy is not fixed?
cash value growth
business owner could make a ____________ assignment of his or her life insurance policy to the bank
collateral
when premiums are paid with after tax dollars, the death benefit is generally not subject to
federal income taxation
protect his family against losing home
decreasing term
not a term for period of time during which the annuitant receives income
depreciation period
paid-up additions
dividends are used to buy additional policies that increase the face amount of the original policy
not true regarding equity indexed annuities
earn lower interest rates than fixed annuities
in absence of a viable beneficiary, proceeds will be paid to
estate of the insured
what does level refer to in level term insurance?
face amount
life insurance creates an immediate estate
face value of the policy is payable to the beneficiary upon the death of the insured
married couple wants to include the entire family in their whole life policy under one rider
family term
not business use of life insurance
funding against general company financial loss
where are premiums from fixed annuities invested?
general account
in life insurance policies, cash value increases
grow tax deferred
An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice?
illegal
not true regarding deferred annuity
income payments begin within 1 year from date of purchase
what do individuals use to transfer their risk of loss to a larger group
insurance
interest only option
insurance company retains the policy proceeds and pays interest on the proceeds to the beneficiary at regular intervals
all advertisements are responsibility of the
insurer
paid-up option
insurer can accumulate dividends at interest and then use them to pay the policy earlier than planned
what does the guaranty association guard against?
insurer insolvency
policy components contains the company's promise to pay?
insuring clause
when a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income?
interest only
accidental death rider
it will pay double or triple the face amount
joint life
only pays one death benefit its premium is less than the total of the two individual policies
not eligible for coverage under key person
owner of a show
viatical settlement
owner sells insurance policy for percentage of the face amount of the policy
which of the following is consideration on part of the insurer?
paying a claim
estate conservation
paying inheritance taxes and federal estate taxes
Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?
payor benefit
nonqualified annity plans
perfectly legal way for selected employees to receive certain types of benefits. before-tax corporate dollars can be used for these plans
not true of universal life policy
planned premium pays for mortality charges and expenses and any excess is returned to the policyowner
which of the following would be an example of policy replacement?
policy is reissued with a reduction in cash value
in which of the following instances would the premium be tax deductible?
premiums paid by an employer on a $30,000 group term life insurance plan for employees
incontestability clause
prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years. it does not apply to statements relating to age, sex, or identity
Federal Fair Credit Reporting Act
regulates consumer reports
once the cash surrender value option is selected, the coverage is terminated and the policy cannot be
reinstated
inspection report
report regarding a potential insured that includes financial status, hobbies, and habits
nonforfeiture values
required by state law to be included in the policy
upon policy dilivery, producer may be required to obtain any of the following EXCEPT:
signed waiver of premium
fixed period installments option (period certain)
specified period of years is selected and equal installments are paid to the recipient. payments will continue for the specified period even if the recipient dies before end of period
family term rider incorporates
spouse term and children's term
material misrepresentation
statement by the applicant that upon discovery would affect the underwriting decision of the insurance company
contributions are tax deferred and earnings on the money in the plan accrue on a
tax-deffered basis
appropiate for individual with low income and high insurance needs?
term insurance
one year term insurance
the dividend option in which the policyowner uses dividends to purchase a term policy for one year
The protocol for replacement does not apply to which of the following situations?
the existing and replacing insurer are the same & the transaction involves credit life insurance
following requirements for life insurance illustrations except:
they must be part of the contract
interest credited under this option is taxable whether or not the policyowner receives it
true
policy allows withdrawals and partial surrenders?
universal life
term riders
used to customize a permanent life insurance policy to meet the needs of the policyowner
benefits not available under social security
welfare benefits
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?
$10000, no tax consequence-During an IRA direct transfer (or direct rollover), the full amount gets reinvested from one plan to the other.
What percentage of a company's employees must take part in a noncontributory group life plan?
100%-If the employer pays all of the premium, all employees must be covered to avoid adverse selection.
producer must report to consumer that an investigative consumer report will be obtained within how many days?
3 days
Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insureds' death?
A minor son of the insured
All of the following are business uses of life insurance EXCEPT
Funding against general company financial loss.-Both life and health insurance can be used for a variety of purposes in a business setting, including the funding of business continuation agreements, compensating executives, and protecting the firm against financial loss resulting from the death or disability of key employees.
Which of the following describes the tax advantage of a qualified retirement plan?
The earnings in the plan accumulate tax deferred.
The policyowner of a Universal Life policy may skip paying the premium and the policy will not lapse as long as
The policy contains sufficient cash value to cover the cost of insurance.
The policyowner of a Universal Life policy may skip paying the premium and the policy will not lapse as long as
The policy contains sufficient cash value to cover the cost of insurance.-In Universal Life Insurance, the policyowner may skip a premium payment without lapsing the policy as long as the policy contains sufficient cash value at the time to cover the cost of insurance for that premium period.
A temporary insurance License may be issued without examination in all of the following instances EXCEPT
To an applicant who fails to pass an insurance producer's examination.
What is the purpose of a fixed-period settlement option?
To provide a guaranteed income for a certain amount of time
The paid-up addition option uses the dividend
To purchase a smaller amount of the same type of insurance as the original policy.
In forming an insurance contract, when does acceptance usually occur?
When an insurer's underwriter approves coverage-In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy.
If the insured pays $100 premium for every month with insurance coterage yet the insurer promises to pay $10,000 for the cover losses what characteristics of an insurance contract is as described
aleatory
What does "liquidity" refer to in a life insurance policy?
cash values can be borrowed at any time
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?
consideration
A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that?
joint life policy
Variable Life insurance is based on what kind of premium?
level fixed
variable life insurance is based on what kind of premium
level fixed
Which two terms are associated directly with the premium?
level or flexible
Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary?
life income with period certain
What is the term for how frequent a policy owner is required to pay the policy premium
mode
Who is a third-party owner?
policyowner is not the insured-Third-party owner is a legal term used to identify an individual or entity that is not an insured under the contract, but that has a legally enforceable right under it.
The insurer discovered that one of the applicants for life insurance missed a couple of questions on the application. What should the insurer do with the application?
return to the applicant for completion
The Ownership provision entitles the policyowner to do all of the following EXCEPT
set premium rates
Which of the following types of risk will result in the highest premium?
substandard risk
Which of the following is NOT true of life settlements?
the seller must be terminally ill
The insured undder a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive?
$100000
How many credit hours of excess continuing education are producers allowed to carry over to the next renewal cycle?
12 hours
As a condition for renewal of their licenses, how many hours of continuing education are required for all resident and nonresident insurance producers?
24
Unless revoked or suspended, how long does a producer's license remain in effect in Tennessee?
24 months
Under which of the following circumstances would an insurer pay accelerated benefits?
An insured is diagnosed with cancer and needs help paying for her medical treatment.
Which of the following information will be stated in the consideration clause of a life insurance policy?
amount of premium payment
Assuming that a policy does not contain an unconditional refund provision of at least 10 days, when must a Buyer's Guide and policy summary be provided?
before accepting the initial premium
If a producer continues to violate the Insurance Code, a new civil penalty will be assessed every
day
Which of the following are NOT fundable by annuities?
death benefits
When would a misrepresentation on the insurance application be considered fraud?
intentional and material
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 establishing the target premium for a universal life policy?
to keep the policy in force-The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.
If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered
unfair trade practice
What is the name of the insured who enters into a viatical settlement?
viator
Which of the following types of insurance policies would perform the function of cash accumulation?
whole life-Life insurance is unique from other types of insurance in that it could perform the function of cash accumulation. Cash values are available in whole life policies.
Which of the following information will be stated in the consideration clause of a life insurance policy?
amount of premium payment-The consideration clause states that the value offered by the insured is the premium and statements made in the application, so it will include the information about the amount and frequency of premium payments.
All other factors being equal, the least expensive first-year premium payment is found in
annually renewable term
An insurer wants to begin underwriting procedures for an applicant. What source will it consult for the majority of its underwriting information?
application
An insurance producer may not act as an agent for an insurer unless he/she has become which of the following?
appointed
SIMPLE Plans require all of the following EXCEPT
at least 1000 employees
Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium?
automatic premium loan-Automatic premium loan provision is not required, but is commonly added to contracts with a cash value at no additional charge. This is a special type of loan that prevents the unintentional lapse of a policy due to nonpayment of the premium.
A Limited Insurance Representative is an individual, other than an insurance producer, who may solicit or negotiate contracts for certain types of insurance which includes all of the following EXCEPT
automobile physical damage insurance-A Property Insurance license is required to write automobile physical damage coverage.
The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract?
conditional-A conditional contract requires both the insurer and policyowner to meet certain conditions before the contract can be executed, unlike other types of policies which put the burden of condition on either the insurer or the policyowner.
Which of the following terms describes making false statements about the financial condition of any insurer that are intended to injure any person engaged in the business of insurance?
defamation
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.
At the time the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability. This rider is called
guaranteed insurability
An insurer publishes intimidating brochures that portray the insurer's competition as financially and professionally unstable. Which of the following best describes this act?
illegal under any circumstance
The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the
incontestability clause
The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPT
insured's age at death
Which of the following will be included in a policy summary?
premium amounts and surrender values
Which of the following statements regarding HIV testing for insurance purposes is NOT true?
insurers are barred from requesting HIV testing
Which provision of a life insurance policy states the insurer's duty to pay benefits upon the death of the insured, and to whom the benefits will be paid?
insuring clause
Which settlement option allows the insurer to retain the face amount but pay some income based on gain on the proceeds to the beneficiary at regular intervals?
interest only
An insured purchased a Life Insurance policy. The agent told him that depending upon the company's investments and expense factors, the cash values could change from those shown in the policy at issue time. The policy is a/an
interest-sensitive whole life
A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy
required a premium increase each renewal
Under the Fair Credit Reporting Act, if the consumer challenges the correctness of the information contained in his/her report, the reporting agency must
respond to the consumers complaint
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
An insured under a life insurance policy has been diagnosed with a terminal illness and has 6 months to live. The insured knows that his financial state will worsen even more with the upcoming medical expenses. What option could the insured utilize?
viatical settlement
The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called
waiver of premium
Who is the owner and who is the beneficiary on a Key Person Life Insurance Policy?
employer
All of the following are dividend options EXCEPT
fixed period installments
When would a 20-pay whole life policy endow?
when the insured reaches age 100-A limited-pay whole life policy, just like straight life, endows for the face amount if the insured lives to age 100. The premium is, however, completely paid off in 20 years.
If an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE?
The policy will be interpreted as if the insurer waived its right to have an answer on the application.
Which of the following activities is NOT performed by an insurance producer?
issuing the policy-Any activity that falls within the definition of transacting insurance requires that the person be licensed as an insurance producer. Insurance policies are issued by insurers and not producers.
All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT
Upon conversion, the death benefit of the permanent policy will be reduced by 50%.-Convertible term insurance is convertible without proof of insurability up to the full term death benefit. However, upon conversion, the premium for the permanent policy will be based on the insured's attained age.
Assuming that a policy does not contain an unconditional refund provision of at least 10 days, when must a Buyer's Guide and policy summary be provided?
before accepting the initial premium-The insurer must provide, to all prospective purchasers, a Buyer's Guide and a Policy Summary prior to accepting the applicant's initial premium. This is not required if the policy contains an unconditional refund provision of at least 10 days, or if the Policy Summary contains an unconditional refund offer. Under these circumstances, the Buyer's Guide and Policy Summary can be delivered with the policy or prior to delivery of the policy.
The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract?
conditional
