Test prep 3
When an annuity is written, whose life expectancy is taken into account? Annuitant Beneficiary Life expectancy is not a factor when writing an annuity. Owner
Annuitant The annuitant receives payments from an annuity and is the person whose life expectancy is considered when writing the contract. The annuitant and annuity owner are often the same person but do not have to be.
Who makes up the Medical Information Bureau? Hospitals Former insured Physicians and paramedics Insurers
Insurers The Medical Information Bureau is made up of insurers so the companies can compare the information they have collected on a potential insured with information other insurers may have discovered.
What is the maximum amount a person guilty of an unfair method of competition or an unfair or deceptive act or a prohibited practice may be fined in any 12 month period? $250,000 $100,000 $25,000 $1,000
$100,000 If the Director determines, after a hearing, that a person is guilty of an unfair method of competition or an unfair or deceptive act or a prohibited practice, the guilty person will be ordered to pay a fine of not more than $1,000 for each violation but not to exceed $100,000 in any 12 month period, and/or have his/her license revoked or suspended.
What is the advantage of reinstating a policy instead of applying for a new one? Proof of insurability is not required The face amount can be increased The cash values have gained interest while the policy was lapsed The original age is used for premium determination
The original age is used for premium determination The reinstatement provision allows the policyowner an opportunity to put a lapsed policy back in force, subject to proving continued insurability. If the policyowner elects to reinstate the policy, as opposed to purchasing a new policy, the reinstated policy is restored to its original status.
If an insured continually uses the automatic premium loan option to pay the policy premium, The cash value will continue to increase. The insurer will increase the premium amount. The policy will terminate when the cash value is reduced to nothing. The face amount of the policy will be reduced by the automatic premium loan amount.
The policy will terminate when the cash value is reduced to nothing. This option, usually elected at the time of application, provides that in case of a possible policy lapse, the premium will be automatically paid form the contract's guaranteed cash value. However, once the cash value is exhausted, the policy will terminate.
In order for a life insurance policy with graded death benefits to be issued to an individual over the age of 76, the first year death benefit must be at least what percentage of the total face amount on the policy? 50% 75% 100% Graded death benefits cannot be issued to someone over the age of 75
50% If the insured is age 76 or older, the graded death benefit policy cannot be issued unless the policy provides at least 50% of the face amount as a first-year death benefit.
A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision? Waiver of premium Incontestability period Assignment Automatic premium loan
Automatic premium loan This 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.
All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT Stocks, securities, or bonds. An offer to share in commissions generated by the sale. Dividends from a mutual insurer. An offer of employment.
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.
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? A legal advertising strategy Unfair Discrimination Defamation Illegal
Illegal It is illegal to participate in any boycott, coercion, or intimidation that is intended to restrict fair trade or create a monopoly.
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? Refuse to pay the death benefit because of the fraud Pay a decreased death benefit Sue for the right to not pay the death benefit Pay the death benefit
Pay the death benefit The 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, even on the basis of a material misstatement of facts or concealment of a material fact.
Before the Director will issue a license, a person must meet all of the following qualifications EXCEPT Pass an examination for each line for which a license is sought. Be appointed to represent at least one authorized insurance company. Be at least 18 years of age. File an application with the Director.
Be appointed to represent at least one authorized insurance company. A person does not have to be appointed to represent a company before he/she is licensed.
The Director, or his designated examiner, may examine the conduct of any insurance company operating in Missouri. The Director must conduct a financial examination of every insurer licensed in Missouri at least Every five years. Every year. Every other year. Every three years.
Every five years. SS374.205 states the Director must examine the finances of every insurer every five years, as part of the examination of the insurer's conduct.
Which of the following provisions in group life policies prevents the insurer from denying a claim due to statements on the application after a certain period of time? Payment of claims Incontestability Waiver of premium Grace period
Incontestability Incontestability provision prevents an insurer from denying a claim due to statements in the application after the policy has been in force for a period 2 years, except for nonpayment of premium or fraud.
Which of the following is NOT true regarding the accumulation period of an annuity? It is also known as the pay-in period. It would not occur in a deferred annuity. It is the period during which the annuity payments earn interest. It is the period over which the owner makes payments into an annuity.
It would not occur in a deferred annuity. 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).
All of the following would be different between qualified and nonqualified retirement plans EXCEPT Taxation of withdrawals Taxation of contributions IRS approval requirements Taxation on accumulation
Taxation on accumulation Taxation on accumulation is deferred in both types of plans. The rest of the characteristics would differ.
An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT? The insured would not need to prove insurability for a conversion policy. The insured may convert coverage to an individual policy within 31 days. The premium for individual coverage will be based upon the insured's attained age. The insured may choose to convert to term or permanent individual coverage.
The insured may choose to convert to term or permanent individual coverage. When group coverage is converted to an individual policy, the insurer will determine the type of coverage, usually permanent insurance.
All of the following are true of key person insurance EXCEPT The key employee is the insured. The plan is funded by permanent insurance only. There is no limitation on the number of key employee plans in force at any one time. The employer is the owner, payor and beneficiary of the policy.
The plan is funded by permanent insurance only. Key Person coverage may be funded by any type of life insurance.
What kind of policy allows withdrawals or partial surrenders? Variable whole life Universal life 20-pay life Term policy
Universal life Universal Life products allow the partial withdrawal, or surrender, of the policy cash value.
When is the earliest a policy may go into effect? When the first premium is paid and the policy has been delivered When the insurer approves the application After the underwriter reviews the policy When the application is signed and a check is given to the agent
When the application is signed and a check is given to the agent The policy can be effective as early as the date of the application, if the premium is submitted with the application and the policy is issued as applied for.
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 Decreased death benefit at each renewal. Required a premium increase each renewal. Built cash values. Required proof of insurability every year.
Required a premium increase each renewal. Annually Renewable Term policies' premiums are adjusted each year to the insured's attained age; however, the policy may be guaranteed renewable. Death benefits remain level, and as with any term policy, there are no cash values.
Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early? Accumulation at Interest Paid-up additions Dividend Accumulation option Paid-up option
Paid-up option 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 from paid-up additions, in which the dividends are used to buy additional policies that increase the face amount of the original policy.
Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy? Premiums are taxable to the employee. Premiums are not tax deductible as a business expense. Premiums are tax deductible by the key employee. Premiums are tax deductible as a business expense.
Premiums are not tax deductible as a business expense. The business cannot take a tax deduction for the expense of the premium. However, if the key employee dies, the benefits paid to the business are usually received tax free.
All of the following are true regarding rebates EXCEPT Dividends are not considered to be rebates. Rebates are allowed if it's in the best interest of the client. Rebates are only allowed if specifically stated in the policy. Rebating can be anything of economic value, given as an inducement to buy.
Rebates are allowed if it's in the best interest of the client. A rebate is an illegal act which involves returning something of value to the client as an inducement to buy, such as the commission. Rebates are only allowed if specifically stated in the policy. Insurance dividends are not considered rebates as the IRS considers it as a return of overpaid premium.
An insured receives an annual life insurance dividend check. What term best describes this arrangement? Reduction of Premium Annual Dividend Provision Accumulation at Interest Cash option
Cash option The cash option allows an insurer to send the policyholder an annual, nontaxable dividend check.
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. Until the policyowner's age 65. For 20 years. Until the policyowner's age 100, when the policy matures.
For 20 years or until death, whichever occurs first. Under a 20-pay life policy, all of the premiums necessary to cause the policy to endow at the insured's age 100 are paid during the first 20 years; however, if the insured dies before all of the planned premiums are paid, the beneficiary will receive the face amount as a death benefit.
When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following? Consideration Legal purpose Contract of adhesion Acceptance
Consideration Consideration is something of value that each party gives to the other. The consideration on the part of the insured is the payment of premium and the representations made in the application.
A person who receives or collects money to be forwarded to the principal is said to have what kind of responsibility? Bailor Bailee Trustee Fiduciary
Fiduciary A person occupying a position of special trust and confidence, usually holding the funds or items of value of another are classified as "fiduciaries". Insurance producers that receive premiums for insurance contracts have a fiduciary responsibility to the insurer that issues the policy.
What must contain a notice of the graded death benefit in a life insurance policy with graded death benefits? The policy underwriting explanation The policy's provisions section The policy's exclusions section The policy application
The policy application The policy application must contain a notice of the graded death benefit.
Which of the following products requires a securities license? Variable annuity Fixed annuity Equity Indexed annuity Deferred annuity
Variable annuity A variable annuity is considered to be a security and is regulated by the Securities Exchange Commission (SEC) in addition to state insurance regulations. For that reason, a person must hold a securities license in addition to a life agent's license in order to sell variable annuities.
The Director may waive the continuing education reporting requirements for any of the following, EXCEPT A licensee with serious physical injury or illness. A licensee who resides outside the United States. A licensee on active duty in the U.S. Armed forces. A licensee age 65 or older.
A licensee age 65 or older. A licensee would need to be age 70 or older to have CE requirements waived.
The Missouri Life and Health Insurance Guaranty Association was created to protect all of the following EXCEPT Policyowners. Beneficiaries. Insureds. Insurers
Insurers. The Missouri Life and Health Insurance Guaranty Association was created to protect policyowners, beneficiaries, and insureds.
What is the purpose of a conditional receipt? It is given by the agent only to applicants who fully prepay all scheduled premiums in advance of policy issue. It is intended to provide coverage on a date earlier than the date of the issuance of the policy. It guarantees the applicant that a policy will be issued in the amount applied for in the application. It serves as proof that the agent has determined the applicant to be fully insurable for coverage by the insurance company.
It is intended to provide coverage on a date earlier than the date of the issuance of the policy. Coverage commences on the date of the application or the date of a medical examination, whichever is later, on the condition that the applicant is determined to be insurable at the rate applied for.
Which of the following is NOT true regarding a Certificate of Authority? It is issued to group insurance participants. It may be necessary for transacting business in a specific state. It is equivalent to an insurance license. It is issued by the state department of insurance.
It is issued to group insurance participants. Before insurers may transact business in a specific state, they must apply for a license or Certificate of Authority from the state department of insurance and meet any financial (capital and surplus) requirements set down by the state.
During replacement of life insurance, a replacing insurer must do which of the following? Guarantee a replacement for each existing policy Designate a new producer for a replaced policy Send a copy of the Notice Regarding Replacement to the Department of Insurance Obtain a list of all life insurance policies that will be replaced
Obtain a list of all life insurance policies that will be replaced The replacing insurance company must require from the producer a list of the applicant's life insurance or annuity contracts to be replaced and a copy of the replacement notice provided to the applicant, and send each existing insurance company a written communication advising of the proposed replacement.
The paid-up addition option uses the dividend To accumulate additional savings for retirement. To purchase a smaller amount of the same type of insurance as the original policy. To purchase a one-year term insurance in the amount of the cash value. To reduce the next year's premium.
To purchase a smaller amount of the same type of insurance as the original policy. The dividends are used to purchase a single premium policy in addition to the face amount of the permanent policy.
Under the Fair Credit Reporting Act, if the consumer challenges the accuracy of the information contained in his or her report, the reporting agency must Send an actual certified copy of the entire report to the consumer. Respond to the consumer's complaint. Defend the report if the agency feels it is accurate. Change the report.
Respond to the consumer's complaint. The consumer has the right to request the information on the report, the reasons for turn down and any adverse underwriting decisions. The reporting agency is required to respond to the consumer's complaint, and, if necessary, to reinvestigate the report.
A Return of Premium term life policy is written as what type of term coverage? Renewable Level Increasing Decreasing
Increasing Return of premium (ROP) life insurance is an increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid.
