AD Banker Final Exam

Carla finances the purchase of a new car. The cost is $30,000. How much credit life insurance can be issued to cover this loan?

$30,000

Insurers and Agents must provide books and records within how many days of request?

30

An insurance license may be suspended or revoked by the _________ after it has been issued.

Commissioner of Insurance

If life insurance proceeds are paid to the deceased's estate they may be subject to ________ taxes.

Federal Estate

Which Whole Life policy is designed to provide a substantial immediate cash value?

Single Premium Whole Life Policy

All of the following are true of a substandard risk, except:

The premium would be discounted

With a Contributory Group Life Plan, what percentage of the employees must participate?

at least 75

All of the following statements are true of a juvenile policy, except:

he insured is the premium payor

A breach under the Doctrine of Warranty may result in:

voidance of the contract

All CA resident insurance licenses renew every _____ years on the last day of the month in which the license was originally issued.

2

All licensed producers must complete how many hours of CE to renew their license?

24

An individual purchased a fixed annuity with flexible premiums. When she annuitized the policy, she chose the Life Income 10-Year Certain option. What would the beneficiary receive if the annuitant dies 4 years after the annuity payout began?

6 more years of payments

Which of the following is NOT an example of Third-Party Ownership?

A business owner buying a life policy on his own life

Level, decreasing and increasing term refer to which policy feature?

Death benefit

Which of the following is TRUE of a term rider when attached to a permanent life policy?

It can provide additional temporary coverage on the insured or on other members of the family

When an insurer wishes to implement changes to a group life policy, whom must it notify?

The group sponsor

All of the following are true of the Law of Large Numbers, except:

The prediction of individual losses is based upon past experience

The mortality rate is based on mortality tables which show life expectancy and the death rate per _______ people living in the U.S.

1,000

If funds are prematurely withdrawn from a Modified Endowment Contract (MEC) they are subject to a _____% penalty on any gains.

10

Errors and Omissions (E&O) policies are typically offered with a minimum limit of liability of how much?

1000000

A married couple purchases a $250,000 Joint Life Policy. When the older of the two dies, what is the amount payable to the survivor?

250,000

The waiting period from the start of a disability to be eligible to apply for social security disability is:

5 months

If a policyowner of a life insurance policy accidently pays in premiums in excess of the MEC guidelines, the insurer can refund the excess within ______ days of the end of the contract year.

60

The Code requires insurers to notify the Fraud Division within how many days of uncovering an incident of actual or suspected fraud?

60

A small business owner used her life insurance policy as collateral for a bank loan. The face amount of the whole life policy was $100,000 and the original amount of the loan was $20,000. If the outstanding loan balance at the time the small business owner died was $10,000, how much will the policy's named beneficiary receive?

90,000

Which of the following could initiate the Accelerated Benefits Provision or Rider of a life policy?

A condition that is terminal

Which of the following is classified as an insurance broker?

A person who negotiates insurance contracts on behalf of an insured

A contract whereby only one party is bound to future performance, is said to be:

A unilateral contract

John is the agent for ABC Insurance and Jane is the insured. Who is the principal in this agency relationship?

ABC insurance

If, as the result of an injury or illness, the insured is deemed to be terminal (i.e., expected to die within 1 or 2 years), what rider added to a life insurance policy would advance a portion of the face value?

Accelerated Benefit (Living Need)

The period of time over which a single sum or periodic deposits grow within an annuity is referred to as the:

Accumulation Period

Confidential information shared by the producer to the insurer and does not become part of the policy is the __________.

Agent's Report

The period of time over which distributions of the accumulated balance is made to the annuitant is referred to as the:

Annuitization Period

An agreement that establishes a price with the intent to purchase the assets of a business should one of the parties to the agreement predeceases the other is called a ___________.

Buy-Sell Agreement

In a replacement transaction, all of the following are insurer duties and responsibilities, except:

Contact the client to assure that they understand the transaction

If an applicant for life insurance misstates his age on the application, what would be the consequence if/when it is discovered?

Death benefit will be what the premium paid would have purchased at issuance at the correct age

The exception to the rule concerning the non-deductibility of life insurance premiums is:

Employer paid group life insurance premium up to $50,000 of coverage

The Insurance Commissioner has the authority to:

Enforce laws relating to insurance

Once issued, if the application is attached to the policy itself, it then becomes part of the ___________.

Entire contract

The Commissioner of Insurance has some general duties, which include all of the following, except:

Examination of the financial status of each insured

An insured has a $175,000 permanent life insurance policy and is having difficulty keeping up with the premium payments. Which Nonforfeiture Option would allow him to forego the premiums and retain the same face amount until the cash surrender value is exhausted?

Extended Term

The ________ is the amount payable to the beneficiary upon death of the insured named in a life insurance policy.

Face amount

The exclusion ratio states that once the entire cost basis has been recovered from a non-qualified annuity income benefit payout then any further payments are __________.

Fully taxable since the excess payments must represent only earnings

Every licensee must include the license number on all of the following, except:

Home address labels

An insurer that experiences the impairment of its financial standing has become:

Insolvent

Which of the following scenarios will trigger an income tax due?

Interest earned on dividends left on deposit with the insurer

If a copy of the application, which led to a life insurance policy being issued, is attached to the policy:

It is considered part of the entire contract

How does an Option A death benefit feature of a Universal Life policy work?

It pays out the policy's face amount

When there is enough cash value within a life policy to pay the premium, the Automatic Premium Loan provision prevents the policy from:

Lapsing

What is the term for the increase in predictability of the loss when the number of similar units of risk increase?

Law of Large Numbers

When a producer, agent, or broker makes a false statement about the benefits or the nature of an insurance policy, the person is guilty of:

Misrepresentation

An aunt and uncle purchase a life insurance policy on their niece, for whom they are the legal guardians. Both guardians perish in an accident some time later. Who receives the death benefit?

No claim is paid out

A life agent who offers for sale, or sells any financial product based on its treatment under the Medi-Cal program must provide, in writing, a disclosure entitled:

Notice Regarding Standards for Medi-Cal Eligibility

The ___________ decides which dividend option is in effect and can change their election at any time.

Policyowner

All are correct statements concerning noncontributory group life, except:

Premiums are calculated by underwriting each individual in the group

All of the following are correct regarding Key Employee Life Insurance, except:

Premiums are deducted from the employee's salary

An agent would be guilty of 'pretexting' or conducting a 'pretext interview' in which of the following situations?

Pretends to be someone or something other than an insurance producer in order to obtain personal non-public information about someone in connection with an insurance transaction

With a life insurance policy, in the event of the premature death of the insured, who has first claim to the policy benefits?

Primary beneficiary

Which of these is not one of the identified purposes of the Insurance Code?

Provide the Commissioner with the ability to rewrite laws as the need arises

In order to make sure that a creditor of the insured is not paid more than the outstanding loan at time of claim, the policyowner should:

Purchase a decreasing benefit policy that matches the loan repayment schedule

Insurance is designed to provide protection against which of the following?

Pure Risk

A producer submits a completed application to the insurer along with the premium check after giving the applicant a conditional receipt. If the applicant completes the required medical exam, but dies prior to the insurer declining the application based upon the results of the medical exam, what is the insurer's responsibility?

Refund any and all premiums paid with the application

In a replacement sale all of the following are producer responsibilities, except:

Reimburse the applicant for any surrender charges that may be incurred as a result of the transaction

Sara applies for a $100,000 30 year level term life insurance policy. The producer quoted her a price of $750 annually if issued as applied for. She wants to make sure that the policy premiums are taken care of just in case she has a total disability. The policy is issued but the premium is now $825. What is the most likely reason why the overall premium increased?

Sara now has added a waiver of premium rider, which requires an additional premium payment

The owner of a Variable Life Policy may allocate the premium into a sub-account which is owned by the insurer, this sub-account is a part of what is also known as the:

Separate Account

Susan, age 65, inherits a substantial sum of money and wants to have the money distributed to her over the rest of her life starting next month. Which product offered by the life insurance industry will allow her to accomplish her objective?

Single Premium Immediate Annuity

Which insurer's owner receives taxable corporate dividends as a return of profit?

Stock

Once the gross amount of dollars required to fund an insured's needs has been determined using the needs analysis approach, what is the next step?

Subtract any assets available to fund financial needs after death

What must insurers use to gather required information and producers must receive product-specific training for each annuity they market to seniors before they may even market the annuity?

Suitability questionnaires

Bert is the owner and insured of a traditional whole life insurance policy he purchased 20 years ago. He has never missed a premium payment. He would like to buy a new car but his bank account is running low. How can he obtain the necessary funds while still maintaining coverage?

Take a policy loan from the insurer

Money accumulated in a permanent policy that the policyowner may borrow via a policy loan or receive if the policy is surrendered, refers to:

The Cash Value

In the event that an insured receives a periodic benefit as the result of exercising the Accelerated Death Benefit Rider, what information must the insurer provide to the insured?

The amount of the accelerated payment, the remaining death benefit and cash values

Earnings on the cash value increase in a permanent policy are taxable, except:

The cash values grow based on premium payments and interest credits in the policy

A universal life policy has a death benefit of $125,000 and a cash accumulation value of $15,000. Generally, what will happen to the policy if there is a $5,000 partial withdrawal?

The death benefit or cash accumulation will be reduced by the partial withdrawal

A is the insured under a $100,000 10 year term life insurance policy with her spouse named as her beneficiary. If she dies in year 9, what will her spouse receive?

The face amount of the policy

An insured has paid premiums annually on her life insurance policy. She would now like to change to a monthly premium payment. What must occur to effect this change?

The insured simply needs to contact the insurance company and request a change in premium mode

An applicant for life insurance pays the agent the initial premium and receives a Conditional Receipt in return. If the policy was to be issued as substandard, but the applicant dies prior to policy issue, what is the result?

The insurer will refund any premiums paid

A policyowner has chosen the Fixed Amount Settlement Option. Which of the following best describes this option?

The owner specifies the amount of each periodic payment and the insurer pays that amount until the funds plus interest are depleted

An insured bought a whole life policy 15 years ago and it has accumulated a cash value of several hundred dollars. She named her spouse as the owner at the time of purchase. Who has the right to change beneficiaries and access the cash value?

The policy owner

Which of the following is true regarding the California Insurance Guarantee Association?

The primary purpose is to protect insureds from insurers that become insolvent

Which of the following might be considered a physical hazard?

The storage of flammables near a furnace

If an annuity policyowner stops putting money into their periodic or flexible premium annuity what happens to the policy values?

They are protected by the nonforfeiture provision

A grandparent purchases a life insurance policy on a granddaughter this is an example of _________.

Third-Party Ownership

A producer submits a completed application to the insurer along with the premium check after giving the applicant a conditional receipt. If the applicant completes the required medical exam, but dies prior to the insurer issuing a policy as applied for, what is the insurer's responsibility?

To pay the claim in full since the conditions of the receipt were fully satisfied

All of the following are considered duties of the California Insurance Commissioner, except:

To set insurance rates

Under Aleatory contracts the exchange of values may be:

Unequal

A __________ is a contractual agreement that allows a company or person to buy one or more of the rights of ownership in a life policy on the life of another person, should the owner/insured become terminally ill.

Viatical Settlement

A good example of Risk Reduction might be:

When one takes action to minimize the severity of a potential loss

A(n) ________ insurer is authorized to write insurance policies in a particular state.

admitted

An insurer that is authorized to do business in a particular state is said to be:

admitted

Surrender charges typically ____________ over time.

decrease

The surrender charge schedule for a variable universal life policy generally ________ over time.

decreases

_________ consist(s) of the amount of premium that is returned to the policyowner if the insurer achieves lower mortality and expense costs than expected.

dividend

In a policy summary all of the following must be shown on both a guaranteed and non-guaranteed basis, except:

dividends

An insurer that is not approved by the state Department of Insurance to transact insurance is called a(n) ___________ insurer.

non-admitted

Whole Life is also known as ________ protection.

permanent

ERISA sets minimum standards for pension plans primarily in the ______ industry.

private

What is the maximum number of appointments a producer may accept?

unlimited

Which of the following Annuities is generally not backed by the insurer's general account assets?

variable

Which of the following annuities requires the producer to hold a securities registration (license) in order to sell it?

variable