Xcel Practice Chapter Exam

Who benefits in Invested-Originated Life Insurance (IOLI) when the insured dies?

Policyowner

Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called

Representations

What type of life insurance incorporates flexible premiums and an adjustable death benefit?

Universal Life

The free-look provision begins

Upon receipt of the policy by the policyowner

Under federal tax laws, what is the tax treatment for an employer providing

Portion of the premiums paid for by the employer may be a tax deduction

From what point must the insurer pay interest on the proceeds of a death claim?

Date of death

Circulation of a maliciously critical statement about an insurer's financial condition meant to damage the insurer's reputation or business is called

Defamation

In Colorado which of the following is true regarding the commingling of an insured

It is never okay

K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable?

Level

Which of these are NOT an example of a Nonforfeiture option?

Life Income

Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?

Life income

An insured's inability to perform two or more activities of daily living may trigger which type of policy rider?

Long Term Care Rider

The entity whose sole purpose is sharing medical data among its member companies is called the

Medical Information Bureau (MIB)

A producer license may be suspended or revoked if the producer is found to be engaging in

Misrepresentation

Which of these life products is NOT considered interest-sensitive?

Modified Whole Life

Which of these is NOT an element of Life insurance premiums?

Morbidity Rate

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

Which of the following statements is CORRECT regarding insurable interest in a life insurance contract?

A person is generally considered to have unlimited insurable interest in himself or herself.

Which of the following is CORRECT regarding a producer's fiduciary responsibility with client's funds?

A producer may never commingle personal funds with funds paid by or to a client

Which of the following statements is CORRECT regarding the tax treatment of a lump-sum payment paid to a life insurance policy's primary beneficiary?

All proceeds are income tax free in the year they are recieved

What provision allows the policyowner to change a term life policy to a permanent one without providing proof of good health?

Conversion

D the agent met with a prospect and ended up selling an insurance policy. While filling out the insurance application, D makes a mistake. In this situation, D MUST

Correct the information and have the prospect initial the change

Which factors are taken into consideration when an insurance company determines the premium rate for a Whole Life policy on an applicant?

Risk Classification

Which of the following are Equity Indexed Annuities typically invested in?

S&P 500

Three law partners form a Cross-Purchase Buy and Sell agreement. This agreement is funded with individual life insurance. How many total life policies are needed for this agreement?

6

A life policy that contains a monthly mortality charge as well as self-directed investment choices is called an

Variable Universal Life policy

___ of personal life insurance premiums is usually deductible for federal income tax

0%

Premature IRA distributions are assessed a penalty tax of

10%

P is blinded in an industrial accident. Which provision of his life insurance policy will pay a stated benefit amount?

Accidental Death and Dismemberment clause

How long does the coverage normally remain on a limited-pay life policy?

Age 100

What type of employee welfare plans are not subject to ERISA regulations?

Church Plans

Which of the following is an example of a misrepresentation?

Describing a universal life policy as a security

Term Insurance has which of the following characteristics?

Expires at the end of the policy period

A life insurance application may be rejected on the basis of all of these factors EXCEPT:

Gender

The Accelerated Death Benefit provision in Is a life insurance policy is also known as a(n)

Living Benefit

Which of these provisions require proof of insurability after a policy has lapsed?

Reinstatement

The premiums paid by an employer for his employee's group life insurance are usually considered to be

Tax-deductible to the employer

A policy if adhesion can only be modified by whom?

The Insurance company

Whole Life Insurance is sometimes referred to as "Straight Life" What does the word straight indicate when using this phrase?

The duration of premium payments

D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary's receive?

The full face amount.

Term Life Policies that have the ability to be converted to permanent coverage may do so during a specific time period. This conversion period

Varies according to the contract

Which of the following consists of an offer, acceptance, and consideration?

contract

The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a(n)

Accidental Death and Dismemberment (AD&D)

P is a forty year old woman and would like to purchase an annuity that will provide a lifetime income stream beginning at age sixty. Which of the following did she NOT buy?

An immediate annuity

What is the initial source of underwriting for an insurance policy?

Application containing statements from the insured

Which of these is NOT considered to be a cost connected with an individual's death?

Business Expenses

Under an Interest Sensitive Whole Life policy,

Cash values are determined by interest rates.

Which of the following is NOT a problem when existing life insurance is replaced with new coverage?

Comprehensive coverage may increase under the new policy

T applies for a life insurance policy and is told by the producer that the insurer is bound to the coverage as of the date of the application or medical examination, whichever is later. Assuming that T is an acceptable risk, what item is given to T?

Conditional Receipt

Which of the following consists of an offer, acceptance, and consideration?

Contract

Which of these policies may NOT have the Automatic Premium Loan provision attached to it?

Decreasing Term

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

Paying insurance premiums on a more frequent basis will cause the policy to have

Higher premiums

Which of these is NOT a reason for purchasing life insurance on the life of a minor

If both parents were to die, it would provide death benefits to the child

All of the following statements regarding a Tax Sheltered Annuity (TSA) are true EXCEPT:

Income derived from the TSA is received income tax-free

The accidental death and dismemberment (AD&D) provision in a life insurance policy would pay additional benefits if the insured:

Is blinded in an accident.

What type of life policy covers two people and pays upon the death of the last insured?

Survivorship

What advantage does the renewability feature give to a term policy?

The insured may extend the coverage period

In order to sell a(n) _______ Life policy, a producer is required to register with the Financial Industry Regulatory Authority (FINRA)

Variable

Which situation allows the producer to also be the beneficiary on a client's application for life insurance?

When insurable interest exists

At what point does a Whole Life Insurance policy endow?

When the cash value equals the death benefit.

Y purchased 100,000 worth of permanent protection on himself and 50,000 worth of 10 year term coverage for his wife on the same policy. Which of these policies did Y purchase?

Whole life policy with an Other Insured Rider

When a minor is designated as the sole primary beneficiary,

a guardian will be court-appointed in the event of a death claim

S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT

beneficiary's age

Variable Whole Life Insurance can be described as:

both an insurance and securities product

In an individual retirement account (IRA) rollover contributions are

not limited by dollar amount

Which of these is NOT a type of agent authority?

principal

A noncontributory group term life plan is characterized by:

the entire cost of the plan is paid for by the employer

All of these are considered to be a benefit under Social Security, EXCEPT for:

unemployment

A term life insurance matures:

upon the insured's death during the term of the policy.

A 15-year mortgage is best protected by what kind of life policy?

15-year decreasing term

On June 1, 2004 G takes out a $20,000 Whole Life insurance policy with an Accidental Death and Dismemberment rider. On July 15, 2005 G intentionally overdoses on sleeping pills and takes her own life. What will G's beneficiary receive as a death benefit?

20,000

T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay?

50,000

The cash value in a(n)_________________ Life policy may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors.

A Universal Life policy

Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features?

Aleatory

Which product would best serve a retired individual looking to invest a lump-sum of money through an insurance company?

Annuity

When a policyowner exchanges a term policy for a Whole Life policy without providing proof of good health, which of these apply?

Conversion provision

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

How are surrender charges deducted in a life policy with a rear-end loaded provision?

Deducted when the policy is discontinued

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

How are Roth IRA distributions normally taxed?

Distributions are received tax-free

P owns a 25,000 Life policy that pays the face amount to him if he lives to age 70, or to his beneficiary if he dies before age 70. What kind of policy does P own?

Endowment at Age 70

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 Policies that do not meet the 7-pay test are considered MEC's and will lose favorable tax treatment. The test is designed to discourage premium schedules that would result in a paid-up policy before the end of a seven year period

A Universal Life policy is sometimes referred to as an unbundled Life Policy because the owner can see the interest earned, cost of insurance, and the

Expense Charges

Which requirement must be met for a n association to be eligible for a group life plan?

Group was formed for a purpose other than acquiring insurance

Which of these actions should a producer take when submitting an insurance application to an insurer.

Inform insurer of relevant information not included on the application

Information obtained from a phone conversation to the proposed insured can be found in which of these reports?

Inspection Report

In a Key Employee life insurance policy, the third-party owner can be all of the following EXCEPT:

Insured

The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death is called

Insuring agreement

All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death EXCEPT

Interest Only

K's whole life insurance policy lapsed two months ago due to nonpayment. She would now like to reinstate the policy. All of these statements Re correct about the policy's reinstatement EXCEPT

K will forfeit the right to use automatic loan provision upon reinstatement.

An architecture firm would stand to lose a lot of money in the event of the death of its project manager. Which type of policy should the firm purchase on its project manager?

Key Person Life Policy

Which of these is an element of a Single Premium annuity?

Lump-sum payment

Which of the following is TRUE about a qualified retirement that is "top heavy"?

More than 60% of plan assets are in key employee accounts

All of these statements concerning Settlement Options are true, EXCEPT:

Only the beneficiary may select

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

Which is true concerning a Variable Universal Life policy?

Policyowner controls where the investment will go and selects the amount of the premium payment

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

When a life insurance underwriter is determining insurability, it is illegal to base those decisions on

Sexual Orientation

Upon delivery of a rated life insurance policy, the Producer must obtain each of the following EXCEPT:

Signed HIPAA disclosure

S recently received a $500,000 lump sum retirement buyout from her employer. She would like to buy an annuity that will immediately furnish her with a guaranteed income for life. What type of annuity is best suited for her situation?

Single Premium

What type of annuity has a cash value that is based upon the performance of it's underlying investment funds?

Variable

Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?

Variable Universal Life

At what point does an informal agreement become a binding contract?

When consideration is provided by one of the parties to the contract

Which of these is an element of a Variable Life Policy?

A fixed, level premium

E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Although E was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E's life insurance policy be directed to?

F

What is the Suicide provision designed to do?

safeguard the insurer from an applicant who is contemplating suicide

M completes an application for life insurance but does not pay the initial premium. All of these actions must occur before M's policy goes into effect EXCEPT

Free-look period has expired

T is the policy owner for a Life Insurance policy with an Irrevocable beneficiary designation. If T wishes to change the beneficiary

Beneficiary

A whole life insurance policyownet foes not wish to continue making premium payments. Which of the following enables the policyowner to call the policy for more than its cash value?

Life-Settlement Contract

Which statement is TRUE in regards to a policy loan?

Past-due interest on a policy loan is added to the total debt

K has inherited a large sum of money. J purchases an annuity with this sum on July 1, and starts receiving payments August 1. These payments will continue for as long as she and her spouse lives. Which type of annuity did K purchase?

Single Premium immediate Joint With Sirvivor Annuity

All of these are characteristics of an Adjustable Life policy, EXCEPT:

face amount can be adjusted using policy dividends

A policy that becomes a Modified Endowment Contract (MEC)

will lose many of its tax advantages

P purchases a $50,000 term life insurance policy in 2005. One of the questions on the application ask if P engages in scuba diving, to which P answers "No". The policy is then issued with no scuba exclusions. In 2010, P takes up scuba diving and dies in a scuba-related accident in 2011. What will the insurer pay to P's beneficiary?

50,000 minus any outstanding policy loans.

An IRA owner can start making withdrawals and NOT be subjected to a tax penalty beginning at what age?

59 1/2

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

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

A policyowner may generate a taxable income from which of the following Dividend options

Accumulation at Interest

S is covered by a whole life policy. Which insurance product can cover his children?

Child Term Rider

A company that has not been authorized to operate in Colorado is known as

a nonadmitted insurer

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

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

A Cost of Living rider gives the insured

Additional Death benefits

The amount of monthly disability benefits payable under Social Security is affected by which of the following factors?

Amount of the benefits available from other sources

Insurance policies are offered on a "take it or leave it" basis which make them

Contracts of adhesion

What does a 401(k) plan generally provide its participants?

Salary-deferral contributions

What action can a policyowner take if an application for a bank loan requires collateral?

Assign policy ownership to the bank

Any changes made on an insurance application requires the initials of whom?

applicant

If a contract of adhesion contains questionable language, to whom would the interpretation be in favor of?

Insured

Which of the following is an example of relating?

Returning a portion of a premium as inducement to purchase insurance.

if a producer is found to be writing primarily controlled business,

the Commissioner will not renew the license

At what time must a policyowner have insurable interest on the insured in order for the life policy to be valid?

At time of Application

A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following?

Aviation Exclusion

t is given a receipt after completing a life insurance application and paying the initial premium. Under this situation, T's coverage is

Conditional, depending on the insurer's underwriting guidelines.

If its employees share in the cost of insurance, what type of group life insurance plan would a corporation have?

Contributory

A producer that only sells insurance to family members is said to be engaging in

Controlled business

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 type of life policy has a death benefit that adjusts periodically and is written for a specific period of time?

Decreasing term

Which Federal law allows an insurer to obtain an inspection report on a potential insured?

Fair Credit Reporting Act

M purchased an Accidental Death and Dismemberment (AD&D) policy and named his son as beneficiary. M has the right to change the beneficiary designation at anytime. What type of beneficiary is his son?

Revocable

In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?

Unilateral

The part of a Life Insurance policy guaranteed to be true is called a(n):

Warranty

Which of these needs is satisfied by Adjustable Life insurance?

insured need for flexible premiums

Whole Life Insurance Policies are contractually gaurenteed to provide each of the following EXCEPT:

partial withdrawal features beyond surrender charge period

A retirement plan that sets aside part of the company's net income for distributions to qualified employees is called a:

profit-sharing plan

Under a Graded Premium Whole Life policy,

the Premium increases each year during the early years of the conteact and remains the same after that time.

ABC Insurance Company has accepted a life insurance application which contains unanswered questions. The company then makes the application part of the life contract. In this situation the insurer has:

waived one of its legal rights

Which of the following is an important wunderwriting principle of group life insurance.

Everyone must be covered in the group

a life insurance policy would be considered a wagering contract WITHOUT:

Insurable Interest

In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the policy?

Owner's Rights

S buys a $10,000 Whole Life policy in 2003 and pays an annual premium of $100. S dies 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did S include on the policy?

Return of a premium rider

Which if the following best describes a warranty

Statement gaurenteed to be true