XCEL Final Exam
When a producer is replacing an existing ordinary life insurance policy, the producer must take all of the following actions EXCEPT
obtain the beneficiary's signature on a summary of all policies to be replaced
Insurance policies are considered aleatory contracts because
performance is conditioned upon a future occurrence
Who elects the governing body of a mutual insurance company?
policyholders
The Replacement of Life Insurance and Annuities regulation is designed to protect the interest of the
policyowner
If an annuity application was not taken in person, an insurer must provide the applicant a Buyer's Guide
within 5 business days of the insurer receiving the application
The incontestability of a Life or Health Insurance Policy generally becomes effective after how many years?
2 years
An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?
20% is withheld for income taxes
What type of policy would offer a 40-year old the quickest accumulation of cash value?
20-pay life
Renewing a producer's license requires __ hours of continued education every 2 years.
24
An insurer that terminates a producer's appointment must inform the Commissioner within how many days?
30
Producers must report a change in address to the Commissioner within
30 days
Which product would best serve a retired individual looking to invest a lump-sum of money through an insurance company?
Annuity
An insurance applicant MUST be informed of an investigation regarding his/her reputation and character according to the
Fair Credit Reporting Act
What kind of premium does a Whole Life policy have?
level
A term life insurance policy matures
upon the insured's death during the term of the policy
The part of a life insurance policy guaranteed to be true is called a(n)
warranty
The annuity that represents the largest possible monthly payment to an individual annuitant is a(n)
Straight Life annuity
A producer must remit premiums to the insurer within ___ days after receipt.
45 days
Q is severely injured in an automobile accident and becomes totally disabled. How many months must Q be disabled before being able to apply for Social Security disability benefits?
5
The provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called
Reinstatement
Which of these provisions require proof of insurability after a policy has lapsed?
Reinstatement
What kind of special need would a policyowner require with an Adjustable Life insurance policy?
flexible premiums
Variable Life products require a producer to
hold a Life Insurance license and a Securities license
A life insurance policy would be considered a wagering contract WITHOUT
insurable interest
Which of the following statements must be CORRECT for a nonresident to be eligible for a producer license in this state?
The producer's state of residence must have reciprocity with this state
Which of the following statements is true regarding the replacement of a life insurance policy in Colorado?
The replacing insurer must maintain copies of all records regarding the replacement for at least 5 years
What is the maximum amount the Commissioner can fine an insurer for each violation of a cease and desist order?
$10,000
An employee with $25,000 group term life coverage was recently fired. This employee's group coverage may be converted to a
$25,000 individual whole life policy
If a producer knowingly violates the Unfair Trade Practices laws of Colorado, the Office of the Insurance Commissioner may fine the producer a MAXIMUM of which of the following amounts per violation?
$5,000
An producer who violates a cease and desist order may, after a hearing, be fined up to
$500
What percent of personal life insurance premiums is usually deductible for federal income tax purposes?
0%
How long does the coverage normally remain on a limited-pay life policy?
100 years
A group life insurance policyholder must be given a grace period for premium payment of how many days?
31
The conversion period for a terminated employee to convert group life coverage to an individual plan is
31 days
What is the grace period for Group Life insurance premium payments?
31 days
Any changes made on an insurance application requires the initials of whom?
Applicant
What action can a policyowner take if an application for a bank loan requires collateral?
Assign policy ownership to the bank
S, while in the process of converting her group life insurance to an individual policy, dies. What happens to the claim her beneficiary submits?
Full benefits are payable under the Master contract
An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?
Full face amount minus any past due premiums
In a Life insurance contract, an insurance company's promise to pay stated benefits is called the
Insuring clause
Which of these arrangements allows one to bypass insurable interest laws?
Investor-Originated Life Insurance
What kind of life insurance beneficiary requires his/her consent when a change of beneficiary is made?
Irrevocable beneficiary
Which statement is true regarding a minor beneficiary
Normally, a guardian is required to be appointed in the Beneficiary clause of the contract
Which of the following parties must provide an insured with proper disclosure concerning the replacement of an insurance company?
The producer who sells the new insurance policy
B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of
additional Whole Life coverage at specified times
A variable insurance policy
does not guarantee a return on its investment accounts
Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The widow qualifies for the
marital deduction
Making an unfair comparison of two policies is defined as
misrepresentation
As a condition to be approved for a loan, a creditor may require the borrower to
obtain an insurance policy through an insurer of the borrower's preference
If a producer is going to deposit any premium into a bank account prior to remitting the funds to the insurer, he/she must use a
separate insurance trust account
Colorado's replacement rules apply to all of the following types of insurance EXCEPT
single premium whole life
To be licensed to sell life, accident, and health insurance in Colorado, an applicant must complete
100 hours of prelicensing education
In Colorado, a life insurance applicant has __ days after policy delivery for a full refund of premium if not satisfied for any reason.
15
Which of these is an element of a Variable Life policy?
A fixed, level premium
Which statement is TRUE regarding a Variable Whole Life policy?
A minimum guaranteed Death benefit is provided
Which of the following potential insurance sales would be subject to replacement regulations?
A new policy that causes an existing life insurance policy to be surrendered
What is considered to be a characteristic of an immediate annuity?
Benefit payments start within one payment period of purchase
Company Z has a Cross Purchase Buy-Sell Agreement in place among its three founding partners. If the agreement is funded with individual life insurance, what would it require?
Each partner must own a policy on the other partners
Whose life is covered on a life insurance policy that contains a payor benefit clause?
Child
Which rider provides coverage for a child under a parent's life insurance policy?
Child term rider
N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take?
Claim will be denied
From what point must the insurer pay interest on the proceeds of a death claim?
Date of death
K has a life insurance policy where her husband is beneficiary and her daughter is contingent beneficiary. Under the Common Disaster clause, if K and her husband are both killed in an automobile accident, where would the death proceeds be directed?
Daughter
What type of life policy has a death benefit that adjusts periodically and is written for a specific period of time?
Decreasing term
Which of the following is an important underwriting principle of group life insurance?
Everyone must be covered in the group
Which of these statements describe a Modified Endowment Contract (MEC)?
Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract
N is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event N was killed while flying as a student pilot?
Exclusions are specified hazards listed in a policy for which benefits will not be paid
Term insurance has which of the following characteristics?
Expires at the end of the policy period
What is being delivered during a policy delivery?
Insurance contract to the proposed insured
If a contract of adhesion contains questionable language, to whom would the interpretation be in favor of?
Insured
Who makes the legally enforceable promises in a unilateral contract?
Insurer
Which plan is intended to be used by a sole proprietor and the employees of that business?
Keogh Plan
P completes an application for a $10,000 life policy, but does not give the producer the initial premium. P's coverage becomes effective when
P receives the policy and pays the premium
T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of $10,000 policy should T purchase?
Ten-Year Endowment
Why is an applicant's signature required on a life insurance application?
To attest that the statements on the application are accurate to the best of the applicant's knowledge
What type of reinsurance contract involves two companies automatically sharing their risk exposure?
Treaty
In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?
Unilateral
What type of life insurance incorporates flexible premiums and an adjustable death benefit?
Universal Life
At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act?
Upon completion of the application
What type of annuity has a cash value that is based upon the performance of it's underlying investment funds?
Variable
A company that has not been authorized to operate in Colorado is known as
a nonadmitted insurer
An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the
applicant's physician
What action will an insurer take if an interest payment on a policy loan is not made on time?
automatically add the amount of interest due to the loan balance
An employee of 20 years recently retired at age 59 1/2. This employee's group life contract can be
converted to an individual permanent policy at an individual rate
Consumer reports requested by an underwriter during the application process of a life insurance policy can be used to determine
probability of making timely premium payments
If an insurer is authorized to conduct business in another state and wishes to conduct business in Colorado, it must
receive a certificate of authority from Colorado
If a producer is found to be writing primarily controlled business,
the Commissioner will not renew the license
A noncontributory group term life plan is characterized by
the entire cost of the plan is paid for by the employer
In order for coverage on a non-medical insurance application to take effect the same day, the producer must collect a signed application and
the initial premium
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
20-Pay Life accumulates cash value faster than Straight Life
What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years?
A Family Maintenance Policy pays a monthly income from the date of death of the insured to the end of the preselected period. The payment of the face amount of the policy is payable at the end of such preselected period
What kind of life insurance product covers children under their parent's policy?
A Term rider
Which of the following statements regarding the Notice Regarding Replacement of Life Insurance is CORRECT?
A copy of the notice must be signed by the applicant and submitted with the application
F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed?
Decreasing term policy
P, age 50, purchased an annuity that P will fund with $500/ month for 15 years. The annuity will then pay P retirement payments after the 15 years. Which type of annuity did P purchase?
Deferred
The Common Disaster clause provides that if both the insured and the named beneficiary were to die in a common accident, which of the following is true?
The estate taxes in the beneficiary's estate may be reduced
Taking receipt of premiums and holding them for the insurance company is an example of
Fiduciary responsibility
In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy?
Owner's Rights
P is the insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability?
P will still receive declared dividends
M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?
Pay face amount minus the past due premium
Which of these statements concerning an Individual Straight Life annuity is accurate?
Payments are made to an annuitant for life
Which statement is true concerning a Variable Universal Life policy?
Policyowner controls where the investment will go and selects the amount of the premium payment
Which statement is correct regarding the premium payment schedule for whole life policies?
Premiums are payable throughout the insured's lifetime/ coverage lasts until death of the insured
What is the consideration given by an insurer in the Consideration clause of a life policy?
Promise to pay a death benefit
What type of life insurance are credit policies issued as?
Term
Which of these life insurance riders allows the applicant to have excess coverage?
Term riders allow an applicant to have excess life insurance coverage
What year was the McCarran-Ferguson Act enacted?
The McCarran-Ferguson Act was enacted in 1945 and made it clear that continued regulation of insurance by the states was in the public's best interest
A Return of Premium life insurance policy is
"Whole life and Increasing term". A Return of Premium life insurance policy is whole life insurance with a death benefit rider of increasing term insurance equal to the amount of premiums paid. If the insured dies within the period of term, the beneficiary will receive face amount plus the value of all paid premiums
T calls to file a claim on his health insurance policy. Within how many days must the insurer provide T's proof of loss forms?
15 days
The free-look period for a life insurance policy in Colorado is
15 days
A 15-year mortgage is best protected by what kind of life policy?
15-year decreasing term
A temporary license issued to an applicant for an insurance license is valid for a MAXIMUM of how many days?
180
When replacing an existing life insurance policy, the replacing insurer must notify the existing insurer within
5 days
An IRA owner can start making withdrawals and NOT be subjected to a tax penalty beginning at what age?
59 1/2
Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements?
A STOLI arrangement is used to circumvent state insurable interest statutes
Which provision is NOT a requirement in a group life policy?
Accidental". An AD&D provision is not required in a group life policy.
Which of the following Dividend options results in taxable income to the policyowner?
Accumulation at Interest
The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a(n)
An Accidental Death and Dismemberment (AD&D) rider
When must insurable interest be present in order for a life insurance policy to be valid?
At the time of application
Which of these actions is taken when a policyowner uses a Life Insurance policy as collateral for a bank loan?
Collateral assignment
On August 6, D submitted an application for a $50,000 Life Insurance policy and did not pay the initial premium. On August 18, D went to his doctor complaining of chest pains and some tests were given by the doctor. The life policy was delivered by the producer on August 20 and D explains what had recently taken place with the doctor. What action should the producer then take?
Collect initial premium along with a signed health statement
An applicant for a resident insurance producer's license MUST meet which of the following requirements?
Complete a prelicensing examination
K applies for a life insurance policy on herself and submits the initial premium with the application. She is given a receipt by the agent stating that coverage begins immediately if the application is approved. What kind of receipt was used?
Conditional
What group term life feature permits an individual to depart from the group and continue to be covered without providing evidence of insurability?
Conversion
What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability?
Convertible Term
Which statement regarding the Misstatement of Age provision is considered to be true?
Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered
P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year period. What type of policy should P purchase?
Family Maintenance policy
N, age 50, recently bought an annuity that will pay a guaranteed $2,000/month at age 70 for life. What type of annuity did N purchase?
Fixed Deferred
Which of the following words may be used in the advertisement of life insurance or annuities?
Guaranteed
How would a contingent beneficiary receive the policy proceeds in an Accidental Death and Dismemberment (AD&D) policy?
If the primary beneficiary dies before the insured
When may the Commissioner issue an emergency cease and desist order?
If there is suspicion of an unauthorized person engaging in insurance business without being licensed
The type of annuity that can be purchased with one monetary deposit is called a(n)
Immediate annuity
A long-term care rider in a life insurance policy may trigger a benefit in the event of which of the following?
Inability of the insured to perform more than 2 Activities of Daily Living (ADL's)
Which of the following combination plans is designed to protect an insured from an unpaid mortgage balance upon premature death?
Joint Life
Continuing education is required of individuals licensed to sell which of the following types of insurance?
Life insurance
The Accelerated Death Benefit provision in a life insurance policy is also known as a(n)
Living Benefit
When an existing life insurance policy is being reissued with a reduction in cash value, the producer must sign the
Notice Regarding Replacement of Life Insurance or Annuity
A certificate of authority does which of the following?
Permits a producer to solicit insurance in Colorado
Which of the following best describes a contingent beneficiary?
Person designated by the insured to receive policy proceeds in the event that the primary beneficiary dies before the insured
A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the
Policy Loan provision
Q applied for life insurance and submitted the initial premium on January 1. The policy was issued February 1, but it was not delivered by the agent until February 7. Q is dissatisfied and returns the policy February 13. How will the insurer handle this situation?
Policy was returned within the free-look period, premium will be fully refunded
On a life insurance policy, who is qualified to change the beneficiary designation?
Policyowner
If a producer chooses to conduct business under an assumed name, when must notification be given to the Commissioner?
Prior to using the assumed name
K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true?
Proceeds will be paid to P's estate
Which of the following is required for a life insurance Lapse Notice?
Reason stated why the policy will lapse
J would like to maintain the right to change beneficiaries. Which beneficiary designation should be used?
Revocable
Post-tax dollar contributions are found in
Roth IRA investments
What is the underlying concept regarding level premiums?
The early years are charged more than what is needed
Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?
Variable Life
Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?
Variable Universal Life
Which of these is considered a statement that is assured to be true in every respect?
Warranty
Group life insurance policies are generally written as
annually renewable term
The amount of coverage on a group credit life policy is limited to
the insured's total loan value
A level premium indicates
the premium is fixed for the entire duration of the contract
An individual who purchases a Life annuity is given protection against
the risk of living longer than expected
The Consideration clause of an insurance contract includes
the schedule and amount of premium payments
When is the face amount paid under a Joint Life and Survivor policy?
upon death of the last insured
Insurance policies offered on a "take it or leave it" basis are considered what?
Contracts of Adhesion
When a policyowner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply?
Conversion provision
N is a 40-year old applicant who would like to retire at age 70. He is looking to buy a life insurance policy with level premiums, permanent protection, and be paid-up at retirement. Which of these should N purchase?
N is a 40-year old applicant who would like to retire at age 70. He is looking to buy a life insurance policy with level premiums, permanent protection, and be paid-up at retirement. Which of these should N purchase?
Variable Whole Life Insurance can be described as
both an insurance and securities product
According to the Colorado Fraud Statute, all of the following must contain a warning against insurance fraud EXCEPT
certificates of authority
The incontestable clause allows an insurer to
contest a claim during the contestable period
If a producer completes an insurance application, collects the initial premium, and issues the appropriate receipt,
coverage will be contingent upon the insurer's underwriting policies
Interest on life insurance proceeds is
required if the claim was not paid within 30 days of the date insurer received the claim
The Consideration clause in a life insurance policy indicates that a policyowner's consideration consists of a completed application and
the first initial premium
Which of the following statements is CORRECT if an insured converts his Life policy to Paid-Up Insurance and buys new insurance?
The transaction is considered replacement
When is the face amount of a Whole Life policy paid?
When the insured dies or at the policy's maturity date, whichever happens first