AD Banker Test prep
Evelyn paid a $700 annual premium for a business overhead expense policy that paid a monthly benefit of up to $4,000 for a benefit period of 6 months. When Evelyn became disabled she used the entire benefit for 3 months, which covered $8,000 of employee salaries, as well as $3,000 in rent and utilities. This means that the amount of the benefits which was reported as income equaled: A $12,000 B $8,000 C $3,000 D Zero
A $12,000 All benefits are considered taxable income.
Louise purchased a disability policy when her salary was $4,000 a month. Later, she lost that job and her salary was reduced to $2,000 a month. Three years ago, she became self-employed and now receives $3,500 a month. The maximum disability benefit she might expect will be based on which salary amount? A $3,500 B $2,000 C The weighted average of her income levels over the life of the contract D $4,000
A $3,500 Relations of Earnings to Insurance (an Optional Uniform Provision) establishes that disability benefits may not exceed the monthly earnings of an insured at the time the disability commenced, or his/her average earnings for the 2 years immediately preceding the disability, whichever is greater.
Generally, Universal Life has how many death benefit options to choose from? A 2 B 1 C 4 D 3
A 2 Universal Life allows you to choose from two death benefit options, Option A or Option B.
COBRA is a federal law requiring employers with _____ or more employees to provide the option of continuing the employee's existing health coverage for dependents for up to _____ months following certain qualifying events such as death of the employee. A 20, 36 B 15, 36 C 20, 18 D 25, 45
A 20, 36 The question specifies coverage for dependents (36 months), not the employee (18 months).
A person making application, for themselves or another, to be insured under an insurance policy is called the: A Applicant B Fiduciary C Sponsor D Beneficiary
A Applicant One applying for coverage is always the applicant. Typically, the applicant is also both the insured and the owner, but not always, as in a third-party policy.
How does life insurance reduce financial loss upon the insured's death? A By transferring the risk to the insurer B Through reinsurance risk techniques C Through applicant risk retention strategies D By eliminating the risk
A By transferring the risk to the insurer For a premium, the applicant can transfer a specific dollar amount of risk to the insurer, thereby reducing but not eliminating the entire risk.
Optional Uniform Provisions are included in the contract at the _______ option. A Insurer's B Commissioner's C Beneficiary's D Insured's
A Insurer's The Optional Uniform Provisions are included at the insurer's option. However, if used, they must conform to that state's insurance code.
The ______________ clause is the insurance company's promise to pay the policy's death benefit to the named beneficiary, after receiving due proof of death of the insured, as long as the policy is in force. A Insuring B Consideration C Incontestability D Entire Contract
A Insuring The insuring clause is the insurance company's promise to pay the policy's death benefit to the named beneficiary, after receiving due proof of death of the insured, as long as the policy is in force.
All of the following are Optional Uniform Provisions, except: A Legal Actions B Illegal Occupation C Misstatement of Age D Change of Occupation
A Legal Actions Legal Actions is a Mandatory Uniform Provision. All other responses are Optional Uniform Provisions.
The Insuring Clause under an individual A&H policy would contain all the following, except: A Premium or rate calculations B The length of the policy period C The name of the insured and insurer D What perils are covered
A Premium or rate calculations Premiums or rates would be part of the Consideration Clause. All of the other answers would be part of the Insuring Clause.
Which of the following is NOT an unfair claims practice? A Promptly acknowledging communications pertinent to a claim B Requiring an insured to sue by offering less than the amount due C Failing to attempt, in good faith, to promptly, fairly, and equitably settle a claim in which the insurer's liability has become reasonably clear D Misrepresenting pertinent policy facts or provisions to claimants
A Promptly acknowledging communications pertinent to a claim Promptly acknowledging communications pertinent to a claim is a required, not prohibited, claim practice.
Which of the following would have the highest first-year annual premium for a 30-year-old, all other factors being equal? A Term to age 70 B Term to age 50 C Term to age 60 D Term to age 40
A Term to age 70 40 years of coverage is more costly than shorter terms of coverage.
Which of the following statements is true regarding a Life and Health Insurance Counselor? A The title 'counselor' implies that this person gives advice B The counselor reviews life, health, property, and casualty policies C The counselor can charge a service fee for his advice in addition to a commission on the sale. D The counselor receives a salary from the insurer rather than a commission
A The title 'counselor' implies that this person gives advice This person publicly uses a title, such as insurance adviser, analyst, specialist, policyholders' adviser, or counselor that indicates that this person gives advice or other information to any person interested in a life, accident, or health policy, health benefit plan, or annuity or pure endowment contract.
All of the following regarding revocable beneficiaries is true, except: A They have rights in the policy just like any other party to the contract B They have no vested interest in the policy C Most beneficiaries are designated as revocable D The policyowner can change a revocable beneficiary at any time
A They have rights in the policy just like any other party to the contract The policyowner may change a revocable beneficiary at any time. This beneficiary does not have a vested interest in the policy. Most named beneficiaries are revocable and have no rights.
`Timothy is the insured/owner of a universal life insurance policy and is concerned that in the event of disability, the policy might lapse. Which rider would keep the policy from lapsing if he became disabled? A Waiver of Cost of Insurance B Guaranteed Insurability Rider C Waiver of Premium Rider D Return of Premium Ride
A Waiver of Cost of Insurance Tim has a Universal Life Policy which needs to have enough cash value in it in order to pay the monthly cost of insurance. If he is disabled, the Waiver of Cost of Insurance will keep the policy in force.
Which of the following is not a Mandatory Uniform Provision of an Accident and Health policy? A Waiver of Premium B Payment of Claims C Proof of Loss D Time Limit on Certain Defenses
A Waiver of Premium The other choices are Mandatory Uniform Provisions. Waiver of Premium is a provision that may or may not be included.
Notice of claim is required within _____ days of loss. A 10 B 20 C 90 D 15
B 20 Under the Notice of Claim Provision (a Mandatory Uniform Provision), the insured is required to notify the insurer, in writing, within 20 days of any loss.
How long, typically, is the reinstatement period from policy lapse? A 1 year B 3 years C 2 years D Indefinitely
B 3 years Typically, the reinstatement period is three years, but it can be up to 5 years with some policies or some insurers.
The grace period for an individual health insurance policy being paid on a quarterly basis is: A 10 days B 31 days C 45 days D 7 days
B 31 days 7 days for weekly; 10 days for monthly; and 31 days for all other payment modes (quarterly, semi-annual, and annual).
Generally, an insurer may defer the granting of a policy loan for up to ______ months. A 12 B 6 C 3 D 9
B 6 An insurer, by law, can defer granting a policy loan for up to 6 months.
A licensed agent is required to obtain which of the following before transacting insurance in Texas? A A Certificate of Authority B An appointment from an insurer C A CLU designation D An insurance counselor's license
B An appointment from an insurer Licensed agents are not permitted to transact insurance as an agent until they have been appointed by an insurer authorized to transact insurance in this state.
All of the following are nonforfeiture values, except: A Extended term B Automatic premium loan C Cash surrender D Reduced paid-up
B Automatic premium loan Nonforfeiture values go into effect after a policy lapses. The automatic premium loan will keep a policy from lapsing.
The policy loan amount cannot exceed the ____________. A The cumulative premiums paid B Available cash surrender value C The loan balance D The face amount of the policy
B Available cash surrender value The policy loan amount cannot exceed the available cash surrender value.
How does life insurance reduce financial loss upon the insured's death? A Through applicant risk retention strategies B By transferring the risk to the insurer C By eliminating the risk D Through reinsurance risk techniques
B By transferring the risk to the insurer For a premium, the applicant can transfer a specific dollar amount of risk to the insurer, thereby reducing but not eliminating the entire risk.
If an insured suffers a dismemberment under the AD&D policy, which of the following will provide benefit payouts to the beneficiary? A Principal sum B Capital sum C Principal investments D Capital funds
B Capital sum Dismemberment benefits payable under an AD&D policy are referred to as the capital sum.
All the following qualify for Medicare Part A, except: A Individuals covered by Social Security who have end-stage renal disease B Healthy individuals who are under age 65 and not covered by Social Security, but are willing to pay the Part A premium C Individuals age 65 or over not covered by Social Security, but willing to pay the Part A premium D Individuals covered by Social Security who are age 65 or over
B Healthy individuals who are under age 65 and not covered by Social Security, but are willing to pay the Part A premium Generally, Medicare is intended for individuals age 65 and over. Individuals with certain medical conditions may also qualify at any age. Part A is premium-free for individuals covered by Social Security.
Attaching a(n) ___________ rider excludes coverage for a condition that would otherwise be covered. A Lifetime benefit B Impairment C Rehabilitation benefit D Waiver
B Impairment Attaching an impairment rider excludes coverage for a condition that would otherwise be covered.
Which of the following is correct concerning an LTC policy? A A new waiting period may be established when existing coverage is converted or replaced by another policy B It may define a preexisting condition as a condition for which advice or treatment was recommended or received within 6 months of the effective date of coverage C A policy may be canceled or nonrenewed on the basis of age D It may provide coverage for only skilled nursing care and not any lower levels of care
B It may define a preexisting condition as a condition for which advice or treatment was recommended or received within 6 months of the effective date of coverage LTC policies may define a preexisting condition as a condition for which advice or treatment was recommended or received within 6 months of the effective date of coverage. All other choices describe provisions that are prohibited.
What prohibited trade practice does an agent commit when he lies about policy terms in order to convince a policyholder to cancel an existing policy in order to buy a new policy? A False advertising B Misrepresentation C Rebating D Defamation
B Misrepresentation Misrepresentation involves a false statement made to a policyholder about a policy to induce the policyholder to lapse, cancel, or surrender an existing policy.
If the parents decide to continue a newborn child's coverage and notify the insurance company within 31 days after birth, which of the following is true? A Coverage will be denied if the insurance company isn't notified within 15 days B The newborn cannot be denied coverage at that time C The parents must also provide the insurance company with proof of insurability D The newborn will be covered, as long as there are no congenital defects
B The newborn cannot be denied coverage at that time Notification of birth or adoption and payment of the required premium must be within 31 days after the date of birth or adoption, in order to continue coverage. The newborn cannot be denied coverage at that time.
All of the following are true of a substandard risk, except: A The insured may be rated as older than their actual age B The premium would be discounted C The coverage could be reduced for a period of time D The insured may have a flat additional premium added to their base premium
B The premium would be discounted Individuals whose risk factors do not measure up to underwriting standards are usually issued rated policies.
High Deductible Health Plans (HDHPs) are characterized by which of the following? A Medical expenses are available as first dollar coverage B The premiums are significantly lower than other plans C Once the deductible is paid, the plan pays at 100% D To qualify as a HDHP, the plan must have an HSA associated with it
B The premiums are significantly lower than other plans The premiums payable for a HDHP are significantly lower than other plans, but the insured is responsible for paying more out-of- pocket. To qualify as high deductible health insurance, the annual deductible must meet a minimum dollar amount as defined by the IRS. Other than preventive care, which must be made available as first dollar coverage, benefits for all covered health care expenses are not paid until the annual deductible has been satisfied. An HSA is not required to have an HDHP, but an HDHP is required to set up an HAS for employees.
If the Texas Department of Insurance addresses a reasonable inquiry made to an insurer, the insurer must respond in writing no later than how many days after receipt? A 20 B 10 C 15 D 30
C 15 Any person receiving such an inquiry must respond to it in writing no later than 15 days after receipt, unless the person submits a written notice to the Department requesting additional time to respond.
Which of the following Whole Life insurance policies has the highest annual premium payment per $1,000 of coverage for a 35-year-old, all other factors being equal? A Limited Pay Ordinary Whole Life to age 85 B 30-Pay Ordinary Whole Life C 20-Pay Ordinary Whole Life D Ordinary Straight Whole Life
C 20-Pay Ordinary Whole Life The shorter the premium-paying period, the higher the annual premium.
Which of the following examples of elimination periods provides the lowest benefit: A 3 weeks B 7 days C 6 months D 5 days
C 6 months The longest elimination period will provide the lowest benefit, but will also have the lowest premium.
All of the following are nonforfeiture values, except: A Reduced paid-up B Extended term C Automatic premium loan D Cash surrender
C Automatic premium loan Nonforfeiture values go into effect after a policy lapses. The automatic premium loan will keep a policy from lapsing.
Which is not a valid nonforfeiture benefit option
C Contingent paid-up The nonforfeiture provision provides a benefit in the event of a default in the payment of any premiums, and the reduced paid-up, extended term, shortened benefit period, and other options approved by the U.S. Secretary of Health and Human Services can be selected.
Which of the following is not a valid nonforfeiture benefit option required when the nonforfeiture provision is included in a long-term care policy? A Reduced paid-up B Extended term C Contingent paid-up D Shortened benefit period
C Contingent paid-up The nonforfeiture provision provides a benefit in the event of a default in the payment of any premiums, and the reduced paid-up, extended term, shortened benefit period, and other options approved by the U.S. Secretary of Health and Human Services can be selected.
Group Accidental Death and Dismemberment premiums are _______ by the company paying the premiums as a business expense. A Taxable B Tax-Deferred C Deductible D Tax-Free
C Deductible Group Accidental Death and Dismemberment premiums are tax-deductible by the business owner. Benefits are paid income tax-free because they are not considered income.
Mandatory uniform provisions found in health insurance policies are designed to protect the: A Agency B Insurer C Insured D Producer
C Insured The mandatory uniform provisions are designed to protect the insured's interests.
Optional uniform provisions found in health insurance policies are designed to protect the: A Agency B Insured C Insurer D Producer
C Insurer Optional Uniform Provisions are designed to protect the insurer.
What is an impairment rider? A It guarantees the insured's future insurability B It pays out an additional benefit if the insured cannot perform 2 of the 5 specified functional activities C It excludes specific conditions that normally would cause the entire policy to be declined D It pays out an additional benefit in cases where the cause of loss is a result of an accident
C It excludes specific conditions that normally would cause the entire policy to be declined An impairment rider is a rider added to a policy that will exclude specific conditions that would normally cause a policy to be declined. The use of this rider allows an insured to qualify for a policy with the exclusion attached, where they would otherwise be declined altogether.
Which provision is an Optional Uniform Provision? A Payment of Claims B Claim Forms C Misstatement of Age D Physical Examination
C Misstatement of Age Misstatement of Age is an Optional Uniform Provision. All of the other answers are Mandatory Uniform Provisions.
Which of the following is NOT an unfair claims practice? A Failing to attempt, in good faith, to promptly, fairly, and equitably settle a claim in which the insurer's liability has become reasonably clear B Requiring an insured to sue by offering less than the amount due C Promptly acknowledging communications pertinent to a claim D Misrepresenting pertinent policy facts or provisions to claimants
C Promptly acknowledging communications pertinent to a claim Promptly acknowledging communications pertinent to a claim is a required, not prohibited, claim practice.
An agent's appointment: A Must be renewed before the license expires B Can only be canceled if the agent fails to write new business C Remains in force until terminated or withdrawn D Is valid for a maximum of 2 years
C Remains in force until terminated or withdrawn An agent's appointment remains in force until terminated or withdrawn by the insurer.
Guaranteed Renewable means: A Renewable only at the option of the insurer B Renewable with guaranteed premium C Renewable with adjustable premiums, by classification only D Renewable with adjustable premiums determined by frequency of claim
C Renewable with adjustable premiums, by classification only The Guaranteed Renewable Provision does allow the insurer to adjust premiums upon renewal, but by class only, not on an individual basis. A class of insureds is based on age or other uniform, nondiscriminatory method.
Basic expense policies typically cover all of the following, except: A Medical expenses B Miscellaneous expenses C Routine vision (optometry) or dental care expenses D Hospital expenses
C Routine vision (optometry) or dental care expenses Basic expense policies (basic hospital, surgical and medical expense) typically do not cover routine vision (optometry) or dental care.
When an insurer wishes to implement changes to a group life policy, whom must it notify? A Each participant individually B The beneficiaries C The group sponsor D Management only
C The group sponsor Just as in individual contracts, the owner controls the policy. In this case, only the plan sponsor has a policy (i.e. the Master Policy). As such, the insurer must notify the group sponsor of the changes.
Which of the following is a typical benefit period for a group long-term disability benefit? A 52 weeks B 13 weeks C 26 weeks D 2 years
D 2 years Group long-term disability is characterized by benefit periods of at least 2 years and as long as the lifetime of the insured.
In a whole life policy, cash value must be made available to borrow against after _____ years. A 5 B 4 C 2 D 3
D 3 In whole life policies, cash values must be made available to borrow against after 3 years.
Which of the following is a true statement about the regulation of advertising? A Before using any advertisement, an agent must file it with the Commissioner for written approval B An advertisement may use a trade name of an insurance group designation C The insurer may describe a reduced initial or first year premium as free insurance D A basic illustration shows both guaranteed and non-guaranteed elements
D A basic illustration shows both guaranteed and non-guaranteed elements A basic illustration is an illustration that shows both guaranteed and non-guaranteed elements.
Which of the following is NOT a nonforfeiture benefit that is required to be offered in conjunction with a LTC rider? A Shortened benefit period B Extended term C Reduced paid-up D Accumulate at interest
D Accumulate at interest Accumulate at interest is a settlement option, not a nonforfeiture option.
When the exchange of value is unequal, the contract is considered: A Fraudulent B Unilateral C Personal D Aleatory
D Aleatory In Aleatory Contracts, the parties typically exchange unequal values as is the case when comparing the premium payment to the coverage amount.
Which of the following is not a Mandatory Uniform Provision? A Payment of Claims B Physical Exam and Autopsy C Reinstatement D Conformity with State Statutes
D Conformity with State Statutes Conformity with State Statutes is an Optional Uniform Provision.
Premium is considered the policyowner's: A Credit B Tender C Fee D Consideration
D Consideration Another term for the premium paid by the insured is Consideration.
Producer A tells his clients, falsely, that a rival insurer does not pay claims in a timely fashion. This is an example of what Unfair Trade Practice? A Rebating B Unfair Discrimination C Misrepresentation D Defamation
D Defamation Defamation is the publication or circulation of a statement that is false, maliciously critical of, or derogatory to the financial condition of an insurance company if it is intended to injure any individual or organization engaged in the business of insurance. Defamation includes the aiding, abetting, or encouragement of such a statement whether it is made verbally or in writing.
In a replacement transaction, the insurer that is having its policy replaced is known as the _______ insurer. A Replacing B Insolvent C Conserving D Existing
D Existing The existing insurer is the insurer who has a policy subject to replacement.
When a policy lapses due to nonpayment of premium, which nonforfeiture option is the automatic option? A Reduced paid-up B Automatic premium loan C Cash surrender value D Extended term
D Extended term The automatic nonforfeiture option is extended term. Automatic premium loan is a policy provision which must be elected by the policyowner in advance of the policy lapsing.
The insurance company must meet requirements under the _____ when gathering information about an applicant from a third party. A SEC B FINRA C NAIC D FCRA
D FCRA The insurance company must meet requirements under the FCRA when gathering information about an applicant from a third party.
This rider allows for the insured to obtain additional insurance in between the specified ages including marriage and the birth or adoption of a child, when the need for insurance coverage may increase without having to prove insurability. It is called the ________ rider: A Waiver of Insurability B Family C Additional Insurance Protection D Guaranteed Insurability
D Guaranteed Insurability The guaranteed insurability rider covers events that will allow for the insured to obtain additional insurance in between the specified ages include marriage and the birth or adoption of a child, when the need for insurance coverage may increase. It normally limits the insured to acquire additional amounts of the same type of coverage already in force.
Which statement is incorrect regarding HMOs? A Coverage will not be provided outside the service area except in case of emergencies B Members are required to pay a small copayment for basic health care services to discourage unnecessary use of medical resources C HMOs emphasize wellness programs and diagnostic screenings for early detection which reduces unnecessary treatment in the future D HMOs must provide basic health care services including physical therapy, vision and dental care
D HMOs must provide basic health care services including physical therapy, vision and dental care Usually optical services, physical therapy, and dental care are supplemental and offered as an option.
Which clause in a contract would state that Jim is covered by XYZ insurer for a monthly benefit of $2,000 in the event of disability? A Entire Contract B Consideration Clause C Free Look Provision D Insuring Clause
D Insuring Clause The Insuring Clause states who is covered, by whom, for how much, for what period, and against what peril.
Medical exams are requested in all of the following situations, except: A Insured's advanced age B High amounts of coverage C Past health history D Low amount of premium
D Low amount of premium Medical examinations are usually requested by the insurer after determining if the amount of coverage, age of the applicant, or his/her health history warrants the examination. Premium has nothing to do with it.
Which of the following is NOT a Dividend Option? A Accumulate at Interest B Paid in Cash C Paid-Up Additions D Reduced Paid-Up
D Reduced Paid-Up Reduced Paid-Up is a Nonforfeiture Option. The other answer choices are Dividend Options.
Which statement is false concerning Social Security disability benefits? A The amount of the benefit is based on the employee's Primary Insurance Amount B To be fully insured for disability benefits, the employee must be either fully or currently insured under the Social Security system C Benefits may only start after 5 full calendar months of disability, and are not retroactive to the date of disablement D The employee must only be unable to engage in his/her own occupation to be considered disabled
D The employee must only be unable to engage in his/her own occupation to be considered disabled The employee must be unable to engage in any kind of gainful employment, not just his/her own occupation.
Which of the following is false regarding provisions for life policies? A The policy must have a grace period of at least 31 days B The policy must be incontestable after 2 years from the effective date of coverage C The policy must have a legal action time limit of 2 years D The policy may not include a provision for reinstatement
D The policy may not include a provision for reinstatement A life policy must have a provision that provides for reinstatement of the policy within 3 years.
Which of the following statements about policy dividends is TRUE? A Dividends are guaranteed and taxable as income when received B Nonparticipating policies are eligible for dividends C Dividends can only be withdrawn at certain specified intervals D There are several dividend options to choose from
D There are several dividend options to choose from Dividends are declared under participating policies. They are not guaranteed, and if received, the dividend itself is generally not taxable. They can be withdrawn any time there is an accumulation.
Which of the following is true of traditional commercial insurers? A They offer only group plans of insurance B They traditionally market service-type contracts that pay directly to the provider of the service C They offer only individual plans of insurance D They traditionally market reimbursement-type contracts that pay directly to the insured
D They traditionally market reimbursement-type contracts that pay directly to the insured Traditional commercial insurers market reimbursement contracts that pay directly to the insured.
Which of the following is not a Mandatory Uniform Provision? A Conformity with State Statutes B Reinstatement C Physical Exam and Autopsy D Payment of Claims
A Conformity with State Statutes Conformity with State Statutes is an Optional Uniform Provision.
Which of the following is not a valid nonforfeiture benefit option required when the nonforfeiture provision is included in a long-term care policy? A Contingent paid-up B Reduced paid-up C Extended term D Shortened benefit period
A Contingent paid-up The nonforfeiture provision provides a benefit in the event of a default in the payment of any premiums, and the reduced paid-up, extended term, shortened benefit period, and other options approved by the U.S. Secretary of Health and Human Services can be selected.
What is the 'waiver of premium' called on a Universal Life insurance policy? A. Waiver of Cost of Insurance B. Waiver of flexible premium C. Disability premium income D. Monthly premium waiver
A. Waiver of Cost of Insurance Waiver of Cost of Insurance is a rider that waives the deduction of the monthly cost of insurance and expense charges associated with a Universal Life type policy while the insured is totally disabled, usually after 6 months of continuous disability.
What is the 'waiver of premium' called on a Universal Life insurance policy? A Disability premium income B Waiver of Cost of Insurance C Waiver of flexible premium D Monthly premium waiver
B Waiver of Cost of Insurance Waiver of Cost of Insurance is a rider that waives the deduction of the monthly cost of insurance and expense charges associated with a Universal Life type policy while the insured is totally disabled, usually after 6 months of continuous disability.
Which of the following is not a Mandatory Uniform Provision of an Accident and Health policy? A Proof of Loss B Waiver of Premium C Time Limit on Certain Defenses D Payment of Claims
B Waiver of Premium The other choices are Mandatory Uniform Provisions. Waiver of Premium is a provision that may or may not be included.
The maximum amount the accidental death and dismemberment rider will pay out before it expires is A The capital sum B The capital sum plus the principal sum C There is no stated maximum. It depends on how often the insured is insured. D The principal sum
D The principal sum The principal sum is the maximum payout. It may be paid as a result of the insured's death, or due to multiple injuries .
Which provision is an Optional Uniform Provision? A Claim Forms B Misstatement of Age C Physical Examination D Payment of Claims
B Misstatement of Age Misstatement of Age is an Optional Uniform Provision. All of the other answers are Mandatory Uniform Provisions.
The following statement is true concerning the income received from an individually owned disability income policy: A Premiums are tax sheltered, Income benefit taxable B Premiums paid with after tax dollars, Income benefit not taxable C Premiums are tax sheltered, Income benefit not taxable D Premiums paid with after tax dollars, Income benefit taxable
B Premiums paid with after tax dollars, Income benefit not taxable The premiums are not tax deductible and the benefits are not subject to federal income or FICA tax.
Which is not a qualifying event for the continuation of dependent coverage under the Consolidated Omnibus Budget Reconciliation Act? A The employee's eligibility for Medicare benefits B Termination of the employee for theft C Death of the employee D Divorce or legal separation
B Termination of the employee for theft This would be termination for gross misconduct and neither the employee nor his/her dependents would be eligible for continuation under COBRA.
Which provision states that the insurance company must pay claims immediately? A Payment of Claims B Time of Payment of Claims C Legal Actions D Relation of Earnings to Insurance
B Time of Payment of Claims Time of Payment of Claims (a Mandatory Uniform Provision) stipulates that claims are to be paid immediately upon written proof of loss.
The insurer generally assumes the investment risk in all of the following annuities, except: A Fixed B Variable C Indexed D Market Value Adjustment
B Variable The insurer's general account assets guarantee fixed-dollar annuity contracts, and the insurer bears any investment risk.
Events that will cause termination of continuing health coverage under COBRA include all of the following, except: A The employee becomes eligible for Medicare benefits B The employer ceases to maintain any group health insurance plan C The employee fails to convert to an individual health insurance plan on the day it is offered D Timely premium payments are not made
C The employee fails to convert to an individual health insurance plan on the day it is offered Events that will cause termination of continuing health coverage by COBRA include failure to pay premiums on time, cessation of group health coverage by the employer, and employee eligibility for Medicare benefits. Conversion is a separate benefit.
What provision describes the parts of the life insurance contract? A Consideration B Insuring C Entire Contract D Incontestability
C Entire Contract The entire contract clause describes the documents that are parts of the life insurance contract.
All of the following are Dividend Options, except: A Paid-up additions B One-year term C Extended term D Cash
C Extended term Extended term is a nonforfeiture option, not a dividend option.
Optional uniform provisions found in health insurance policies are designed to protect the: A Insured B Producer C Insurer D Agency
C Insurer Optional Uniform Provisions are designed to protect the insurer.
In the event a parent becomes disabled or dies while paying premiums on a life insurance policy for a minor child, which provision would allow the policy to continue in force until the child reaches a predetermined age? A Return of Premium Rider B Minor Child Rider C Payor Benefit (Waiver of Payor Premium) D Cost of Premium Rider
C Payor Benefit (Waiver of Payor Premium) A Payor benefit rider waives the policy premium in the event of the death or total disability of the premium payor. Usually found in policies covering children to the child's age 21 or 25.
When buying a $25,000 life insurance policy on his daughter, a father wanted to make sure the premium would be paid, even if he became disabled, so he also purchased a: A Waiver of Premium B Waiver of Cost of Insurance C Payor Rider D Long-term Care Rider
C Payor Rider The payor rider is a special rider that pay the premiums on a minor's policy if the adult who owns the policy dies or becomes disabled while the insured is still a minor. Do not confuse it with the Waiver of Premium, which pays if the insured becomes disabled.
Beth exercised an owner's option on a life policy to stop paying premiums but continue to be covered until she was age 100. Which Nonforfeiture Option did she choose? A Paid-Up Additions B Extended Term C Reduced Paid-Up D Paid-Up Option
C Reduced Paid-Up The Nonforfeiture Option that would allow Beth to stop making premium payments and continue to be covered to age 100, but for a reduced face amount, is Reduced Paid-Up. Paid-Up Additions and the Paid-Up Option are Dividend Options.
In a Universal Life policy, the minimum separation between the cash value and the death benefit is called the _______. A The earned interest B The cash value C Risk corridor D The MEC limit
C Risk corridor A universal life policy must include an amount at risk. If the cash value approaches the face amount, the death benefit must increase so as to provide for this amount at risk. This minimum separation between the cash value and the death benefit is called the 'risk corridor.'
Basic expense policies typically cover all of the following, except: A Hospital expenses B Medical expenses C Routine vision (optometry) or dental care expenses D Miscellaneous expenses
C Routine vision (optometry) or dental care expenses Basic expense policies (basic hospital, surgical and medical expense) typically do not cover routine vision (optometry) or dental care.
How is a Variable Universal Life Insurance policy different from a Universal Life Insurance policy? A The adjustability of the face amount B The death benefit options C The ability to invest the cash values in various separate accounts D The premium payments
C The ability to invest the cash values in various separate accounts The policy has a variable component, meaning that the cash values can be invested outside of the insurer's general account in various separate accounts.
What is one of the main reasons for a Universal Life policy to have a surrender charge? A This provides a means for the insurer to recapture their upfront expenses involved in issuing the policy B It encourages large additional premium deposits from policyowners C It motivates the producer to properly sell the policy D It is a way to recoup interest paid, but not earned by the policyholder
A This provides a means for the insurer to recapture their upfront expenses involved in issuing the policy Surrender charges provide a means for the insurer to recapture their upfront expenses involved in issuing the policy.
Jay receives an annual disability benefit of $10,000. His employer contributed 75% of the premium. How much of Jay's benefit is subject to income tax? A $7,500 B $10,000 C $2,500 D None
A $7,500 Jay is covered under a contributory plan in which the employer is contributing 75% of the premium, so 75% of the $10,000 benefit ($7,500) is subject to income tax.
If Jon dies with an outstanding policy loan of $10,000 on his $100,000 interest-sensitive whole life policy that has $15,000 of cash value, what will his beneficiary receive at the time of claim? A $90,000 B $105,000 C $115,000 D $100,000
A $90,000 Upon death, the insurance company recovers any outstanding loan prior to paying out a claim to the beneficiary.
What type of policy has an endowment date, a face amount, and cash value? A A permanent life insurance policy B A mortgage life insurance policy C A traditional group life insurance policy D A decreasing term life insurance policy
A A permanent life insurance policy Only a permanent life insurance policy would have all three features.
The period of time from the first deposit into an annuity to the selection of a settlement option is considered the ___________ period. A Accumulation B Annuitization C Annuity D Deferred
A Accumulation The period of time from the first deposit to the selection of a settlement option is considered the accumulation period, during which taxes are deferred. Accumulation periods are found within deferred annuities.
A 22 year-old applicant for life insurance has a limited budget for premiums. Which of the following policies would provide for the highest face value, for the lowest premium amount? A Annually Renewable Term B 30 year Term C 20 Year Term D 10 Year Term
A Annually Renewable Term Term insurance does not accumulate cash value. The 'pure premium' purchases the highest amount of insurance compared to the other forms of life insurance. The shortest term period offers the lowest cost per $1,000 of coverage at the outset and in the early years.
All of the following are exclusions under an LTC policy, except: A Chemical dependency on one's own prescription drugs B Nervous or mental disorders that have no demonstrable organic cause C Rest cures D Injury arising due to committing a felony
A Chemical dependency on one's own prescription drugs Chemical dependency would not be excluded if it results from the administration of drugs under a physician's prescription and direction.
Which of the following is a Managed Care Provision used by insurers to monitor hospital stays? A Concurrent Review B Retrospective Review C Precertification D Prospective Review
A Concurrent Review Once an insured is admitted to the hospital, the insurer monitors the insured's hospital stay to make certain that everything is proceeding on schedule through the Concurrent Review Provision.
Which of the following is NOT considered one of the essential elements of a contract? A Conditions B Legal Purpose C Offer and Acceptance D Competent Parties
A Conditions The essential elements of a contract are offer and acceptance, consideration, competent parties, and legal purpose.
All of the following must be included in a whole life policy, except: A Guaranteed dividend table B Surrender value C Extended term provision D Cash value accumulation
A Guaranteed dividend table Dividends represent a 'refund of unused premiums' when mutual insurers have a surplus (profit). Dividends are not guaranteed. Cash value accumulates as the policyowner pays premium over the years. The cash surrender value must be stated in the contract if the owner wishes to cancel the policy, and Extended Term is a Nonforfeiture option that must be offered.
If an annuity lifetime benefit is selected in most cases, it is an _________ election. A Irrevocable B Poor C Revocable D Excellent
A Irrevocable If an annuity lifetime benefit is selected, in most cases it is an irrevocable election.
How does an Option A death benefit feature of a Universal Life policy work? A It pays out the policy's face amount B It pays out the face amount less the cash values C It pays out the policy's face amount plus the cash values D It pays out the policy's cash values
A It pays out the policy's face amount Option A in a Universal Life Insurance policy pays out a level death benefit, while Option B pays out an increasing death benefit, the face amount plus the cash values.
How does an Option A death benefit feature of a Universal Life policy work? A It pays out the policy's face amount B It pays out the policy's face amount plus the cash values C It pays out the face amount less the cash values D It pays out the policy's cash value
A It pays out the policy's face amount Option A in a Universal Life Insurance policy pays out a level death benefit, while Option B pays out an increasing death benefit, the face amount plus the cash values.
What health insurance product is designed to provide coverage for necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services provided in a setting other than an acute care unit of a hospital? A Long-Term Care B Retirement Benefits C Medicare Supplement D Outpatient Care
A Long-Term Care The question describes a Long-Term Care Policy.
What prohibited trade practice does an agent commit when he lies about policy terms in order to convince a policyholder to cancel an existing policy in order to buy a new policy? A Misrepresentation B Rebating C False advertising D Defamation
A Misrepresentation Misrepresentation involves a false statement made to a policyholder about a policy to induce the policyholder to lapse, cancel, or surrender an existing policy.
Which of the following is not a way to access the money accumulated in a traditional ordinary permanent life insurance policy? A Partial surrender B Cash surrender C Policy loan D Endowment
A Partial surrender Partial surrenders are typically available only on universal life insurance types of policies.
Variable Whole Life has all of the following features, except: A Partial surrender are allowed B The owner may select which separate account they want their premium to be invested in C The policy provides for both a general account and a separate account D The premium is determined by the insurer and remains fixed and level throughout the contract
A Partial surrender are allowed Partial surrenders are not allowed from a variable whole life policy.
What is the net amount at risk in a Whole Life Insurance policy? A The amount less the cash values B The face amount plus the cash values C The face amount of the policy D The face amount minus any dividends paid
A The amount less the cash values The net amount at risk to the insurer is the difference between the face amount and the cash values.
All of the following regarding convertible term life insurance is true, except: A The conversion can take place at any time B The new premium will be higher on the conversion policy compared to the original policy C Conversion can be based on either the attained or original issue age of the insured D Conversion is without evidence of insurability
A The conversion can take place at any time The right to convert the existing term policy to a permanent policy without evidence of insurability is only available during the conversion period specified in the contract.
Each of the following are characteristics of a Current Assumption Whole Life insurance policy, except: A The death benefit is not guaranteed B The insurance company can change the interest rate credited to the policy C If interest rates increase premiums can be reduced or cash values can increase at a faster rate D The insurance company can change the premium
A The death benefit is not guaranteed Current Assumption Whole Life guarantees a death benefit just like any other whole life insurance product. However based on interest rates premiums can be reduced or increased and cash values can be credited with a higher or lower interest rate.
If the producer discovers that the applicant is not in good health at the time of policy delivery, what should the next step be? A The policy should be returned to the insurer, or the deliver the policy only after the insurer grants permission B Hold onto the policy until the client recovers from their condition, then deliver the policy C Obtain copies of any and all medical records and order a medical exam D Field underwrite in order to determine the additional premium that needs to be collected
A The policy should be returned to the insurer, or the deliver the policy only after the insurer grants permission If the applicant is not in good health, the policy should be returned to the insurer, or the producer may deliver the policy only after the insurer grants permission.
The maximum amount the accidental death and dismemberment rider will pay out before it expires is A The principal sum B There is no stated maximum. It depends on how often the insured is insured. C The capital sum D The capital sum plus the principal sum
A The principal sum The principal sum is the maximum payout. It may be paid as a result of the insured's death, or due to multiple injuries .
Who receives the endowment value of a whole life policy? A The policyowner B The beneficiary C The producer D The insurance company
AThe policyowner The policyowner retains all rights in the policy up to and including receiving the endowment proceeds.
Louise purchased a disability policy when her salary was $4,000 a month. Later, she lost that job and her salary was reduced to $2,000 a month. Three years ago, she became self-employed and now receives $3,500 a month. The maximum disability benefit she might expect will be based on which salary amount? A The weighted average of her income levels over the life of the contract B $3,500 C $4,000 D $2,000
B $3,500 Relations of Earnings to Insurance (an Optional Uniform Provision) establishes that disability benefits may not exceed the monthly earnings of an insured at the time the disability commenced, or his/her average earnings for the 2 years immediately preceding the disability, whichever is greater.
Which of the following term life insurance policies would have the lowest 1st-year annual premium, all other factors being equal? A 10-year B 1-year C 15-year D 5-year
B 1-year The 1-year term life insurance policy would have the lowest first-year premium of the choices provided. In essence, one year of coverage is less risky to the insurer than being locked in to more years.
It is an Unfair Claims Settlement Practice to fail to acknowledge a claim how long after receiving it? A 15 calendar days B 15 business days C 10 calendar days D 10 business days
B 15 business days It is an Unfair Claims Settlement Practice to fail to acknowledge a claim within 15 business days.
Notice of claim is required within _____ days of loss. A 90 B 20 C 15 D 10
B 20 Under the Notice of Claim Provision (a Mandatory Uniform Provision), the insured is required to notify the insurer, in writing, within 20 days of any loss.
When can a policyowner make a change in the policy's coverage or other benefits if an irrevocable beneficiary has been named? A After obtaining the insurer's consent B After the irrevocable beneficiary dies C At any time D After obtaining a court order
B After the irrevocable beneficiary dies The policyowner may not change an irrevocable beneficiary unless the beneficiary dies or provides written consent for the change. If an irrevocable beneficiary is named, the owner may not make changes to the policy that affect the coverage or benefits without consent of the beneficiary.
A 22 year-old applicant for life insurance has a limited budget for premiums. Which of the following policies would provide for the highest face value, for the lowest premium amount? A 20 Year Term B Annually Renewable Term C 10 Year Term D 30 year Term
B Annually Renewable Term Term insurance does not accumulate cash value. The 'pure premium' purchases the highest amount of insurance compared to the other forms of life insurance. The shortest term period offers the lowest cost per $1,000 of coverage at the outset and in the early years.
Which of the following beneficiary designations is a class designation? A Bank of Springfield - creditor B Any children of this marriage C Mary Smith - spouse D Frank Jones - son
B Any children of this marriage A class designation is when the beneficiary is not directly identified by name.
A married couple wants to have funds available so that the heirs to their estate have the funds necessary to pay the estate taxes. Which of the following would be the most economical and effective way to accomplish this? A Buy a Whole Life policy on each spouse B Buy a Joint Survivorship Life policy C Have one spouse buy a whole life policy and the other one a Universal Life policy D Buy a Joint Life policy
B Buy a Joint Survivorship Life policy Joint Survivorship Life pays upon the death of the last to die, and for this reason it is a popular policy with couples who want to defer estate taxes until both are deceased. It is also more economical to buy this one policy than to buy two separate policies.
All of the following are correct statements regarding an FSA, except: A Unused funds generally cannot be rolled over every year B Can only be established if the employer also establishes an HSA C Allows the employee to access funds before all contributions are made to the account D Can be used to cover the cost of prescription drugs
B Can only be established if the employer also establishes an HSA An FSA does not require the establishment of an HSA. Since both accounts provide the same or similar benefits, an employer would not establish both of these.
With a Variable Life Policy, which of the following is guaranteed? A Cash value B Death benefit C Investment returns D Dividends
B Death benefit In a VL policy a death benefit is guaranteed as long as all premiums are paid on time. There is both a guaranteed minimum death benefit and a higher stated face amount. The face amount and cash value are not guaranteed and could be higher or lower than expected.
Producer A tells his clients, falsely, that a rival insurer does not pay claims in a timely fashion. This is an example of what Unfair Trade Practice? A Misrepresentation B Defamation C Unfair Discrimination D Rebating
B Defamation Defamation is the publication or circulation of a statement that is false, maliciously critical of, or derogatory to the financial condition of an insurance company if it is intended to injure any individual or organization engaged in the business of insurance. Defamation includes the aiding, abetting, or encouragement of such a statement whether it is made verbally or in writing.
A producer gathers information about the applicant for the insurer in order to avoid adverse selection. This is considered to be: A Application process B Field underwriting C Principle of indemnity D Law of large numbers
B Field underwriting The agent's primary underwriting role is to make sure the application provides proper information for the insurer.
All of the following activities could cause an insurance purchase to be treated as a STOLI, except: A Keep paying policy premiums until the insured dies and then file a claim B Fill out the application for life insurance on behalf of the insured C Pay for the policy they acquire from the policyowner D Change the policy ownership and beneficiary designations
B Fill out the application for life insurance on behalf of the insured After the investors have paid for the policy, they will change the ownership and beneficiary designations. The investors will also have to pay premiums to keep the policy in force. Upon death of the insured the investors will file a claim for the death benefit.
All of the following activities could cause an insurance purchase to be treated as a STOLI, except: A Pay for the policy they acquire from the policyowner B Fill out the application for life insurance on behalf of the insured C Change the policy ownership and beneficiary designations D Keep paying policy premiums until the insured dies, and then file a claim
B Fill out the application for life insurance on behalf of the insured After the investors have paid for the policy, they will change the ownership and beneficiary designations. The investors will also have to pay premiums to keep the policy in force. Upon the death of the insured, the investors will file a claim for the death benefit.
If the insured dies while the _______ period is in effect, the death benefit paid is the face amount, minus the premiums due. A Settlement B Grace C Incontestability D Reinstatement
B Grace If the insured dies during the grace period, the death benefit of the policy is payable to the beneficiary, minus any premiums or loans due.
C has a $100,000 traditional whole life insurance policy with a $30,000 cash surrender value. He applies for and receives a $10,000 policy loan from the insurer. All of the following about this transaction are true, except: A If the policy is surrendered, C would receive $20,000 less any outstanding interest charges B If C were disabled, his beneficiaries would receive $70,000, less any outstanding interest charges C The loan carries a fixed or variable interest rate D If C died, his beneficiaries would receive $90,000, less any outstanding interest charges
B If C were disabled, his beneficiaries would receive $70,000, less any outstanding interest charges Policy loans carry a fixed or variable loan interest rate. If the policy is surrendered or a death claim is paid, the proceeds are reduced by the outstanding policy loan and policy loan interest.
Optional Uniform Provisions are included in the contract at the _______ option. A Insured's B Insurer's C Commissioner's D Beneficiary's
B Insurer's The Optional Uniform Provisions are included at the insurer's option. However, if used, they must conform to that state's insurance code.
Which is the best description of a Limited Accident Policy? A It only provides coverage for a limited time after an accident B It provides specific benefits for specific injuries from specific causes C It is limited in geographical scope (i.e., only in the state where it was written) D It provides coverage for any type of accident, but not sickness
B It provides specific benefits for specific injuries from specific causes A Limited Accident Policy provides specific benefits for specific injuries from specific causes.
Quentin, age 65, has a life insurance policy he no longer needs and no longer can afford, but he does have a need for cash. XYZ Inc. purchased his policy for less than the face amount but more than the cash value and is now the policyowner and premium payor. This was which of the following transactions? A Buy/Sell Agreement B Life Settlement C Viatical Trust Settlement Agreement D Living Needs Transaction
B Life Settlement A Life Settlement is like a Viatical Settlement except it does not involve a terminally ill insured.
M purchased a traditional permanent life insurance plan many years ago. What happens when he attains age 100? A M gets a refund of all premiums paid B M gets a check for the face amount of the policy C M receives nothing from the insurer because the traditional permanent insurance plan expires D M gets a dividend check from the insurer
B M gets a check for the face amount of the policy At age 100 of a traditional permanent life insurance policy purchased many years ago, when the cash values reach the policy's face amount the policy is said to endow, and M would receive a check in the amount of the face value of the contract.
In order for a claimant to be eligible for _______ benefits, they must qualify based upon need. A Long-Term Care B Medicaid C Medicare Supplement D Medicare
B Medicaid Medicaid is a federal and state administered medical benefit program for persons, regardless of age, whose income and resources are insufficient to pay for health care.
What prohibited trade practice is committed if an agent provides misleading information regarding guaranteed dividends, terms, advantages, or disadvantages of a policy? A Rebating B Misrepresentation C Defamation D False advertising
B Misrepresentation Misrepresentation involves a false statement made to a policyholder about a policy to induce the policyholder to lapse, cancel, or surrender an existing policy.
Which of the following statements about Indexed Life insurance is TRUE? A. To sell Equity Indexed Life, a producer only needs a securities license B. The interest credited to the policy is based off of the performance of a stock market index like the S&P 500 C. The insured/owner bears all risk regarding cash surrender value, as negative stock market performance can cause the cash values to decrease D. The policyowner can decide which separate accounts to invest the policy's cash values into
B. The interest credited to the policy is based off of the performance of a stock market index like the S&P 500 The attraction of this policy is that potentially the interest credit can be higher than what a typically insurer's general account can pay by tying the potential interest credit to a stock market index. Based on the design of the policy, if the index falls in value there is no negative impact to existing cash values.
A medical or physical exam requested by the underwriter to determine insurability: A Requires notification of information practices and written consent under the FCRA B Includes a written statement by the applicant's primary care physician explaining the treatment for a preexisting condition C Is performed by a licensed professional and includes checking vital statistics and routine lab work D Is paid for by the applicant up front and reimbursed by the insurance company once the policy is issued
C Is performed by a licensed professional and includes checking vital statistics and routine lab work A medical exam is paid for by the insurer and does not require written consent under the FCRA. A written statement from the applicant's doctor explaining treatment for a preexisting condition is an attending Physician's statement. The medical exam is completed by usually a registered nurse or a paramedical professional and includes checking vitals, height, weight, and collecting blood and urine samples.
The waiting period from the start of a disability to be eligible to apply for Social Security disability is: A 6 months B 3 months C 5 months D 12 months
C 5 months The waiting period to apply for Social Security is 5 full months from the start of a qualified disability.
Which of the following will receive the smallest monthly income benefit check if an annuity is annuitized? A 65 year old male B 65 year old female C 50 year old female D 50 year old male
C 50 year old female The younger ages receive the smaller payments because they can be paid out for a longer period of time. Females also receive smaller income checks due to a longer life expectancy.
Which of the following is a true statement about the regulation of advertising? A An advertisement may use a trade name of an insurance group designation B The insurer may describe a reduced initial or first year premium as free insurance C A basic illustration shows both guaranteed and non-guaranteed elements D Before using any advertisement, an agent must file it with the Commissioner for written approval
C A basic illustration shows both guaranteed and non-guaranteed elements A basic illustration is an illustration that shows both guaranteed and non-guaranteed elements.
Experience rating utilizes _______ in determining the rate the insurer will charge for group coverage in each year of coverage. A Actual loss experience of everyone in that zip code B Credit rating of all participants C Actual loss experience of the group D The plan sponsor's credit rating
C Actual loss experience of the group Experience looks at claims experience. Creditworthiness of a business or its employees is not a factor in underwriting group insurance.
Insurers include provisions in contracts to help reduce unnecessary claims and the overpayment of claims. Which of the following is not one of those provisions? A Emergency Services B Concurrent Review C Consideration Clause D Mandatory Second Surgical Option
C Consideration Clause The other choices are Managed Care Provisions designed to contain costs. The Consideration Clause stipulates that the payment of the first premium and the statements in the application are the applicant's consideration, and the insurer's consideration is the promise to pay within the contract terms.
The net amount at risk in an Ordinary Whole Life Insurance Policy _________ over the life of the policy. A Remains the same B Increases C Decreases D Varies
C Decreases As the cash values build, the net amount at risk for the insurer declines since the face amount is the benefit paid out upon the death of the insured. It is a way to keep the premiums affordable as the insured ages and the risk of death increases.
Producer A tells his clients, falsely, that a rival insurer does not pay claims in a timely fashion. This is an example of what Unfair Trade Practice? A Unfair Discrimination B Misrepresentation C Defamation D Rebating
C Defamation Defamation is the publication or circulation of a statement that is false, maliciously critical of, or derogatory to the financial condition of an insurance company if it is intended to injure any individual or organization engaged in the business of insurance. Defamation includes the aiding, abetting, or encouragement of such a statement whether it is made verbally or in writing.
Which of the following is considered a qualified expense from a Flexible Spending Account? A Long-term care coverage B Insurance premiums C Dental expenses D Amounts covered under another plan
C Dental expenses Insurance premiums, long-term care coverage, and amounts covered under another plan are not qualified expenses.
All of the following statements about Group Life Insurance are true, except: Employer-paid premiums are tax-deductible B Employee paid premiums are not tax-deductible C Employees receive a tax deduction for employer paid premiums D Employees are taxed on any premiums paid on insurance in excess of $50,000
C Employees receive a tax deduction for employer paid premiums Employer, not employee, paid premiums are tax deductible. Only when the insurance benefit exceeds $50,000 does the employee have to report it as taxable income.
All of the following are TRUE regarding a Waiver of Premium Rider, except: A In a Whole Life policy, cash values continue to build B There is usually a 6 month period before premiums are waived C The insured must repay the unpaid premiums D The insurer foregoes the premium should the insured be disabled
C The insured must repay the unpaid premiums To have to repay the unpaid premiums would defeat the purpose of the rider.
Index Life, Variable, and Variable Universal all have which of the following characteristics in common? A The owner chooses the separate account(s) to invest the cash values in B A securities license is required to sell each policy C The overall policy performance has something to do with the stock market in general D All have a guaranteed death benefit
C The overall policy performance has something to do with the stock market in general All of these policies do not have a guaranteed death benefit, and the Index life policy does not require a securities registration. However, all of them have a death benefit that is somehow tied to the stock market.
All of the following are true regarding Current Assumption Whole Life, except: A. Interest rate changes affect policy premiums B. The policy has a guaranteed minimum death benefit C. If current rates decrease, the policyowner pays reduced premiums, or the cash values will grow faster D. The insurer may have to add a corridor of insurance protection to keep the policy from endowing
C. If current rates decrease, the policyowner pays reduced premiums, or the cash values will grow faster If current rates increase (not decrease), either the policyowner pays a reduced premium, or the cash value will increase at a faster rate.
A client wants to make sure that they can have a permanent life insurance policy several years from now when they can afford it without having to prove insurability. What feature should they make sure they have on their new term life insurance policy? A. Renewability B. Adjustability C. Flexibility D. Convertibility
D Convertibility Convertibility allows for the conversion of term to permanent without proof of insurability.
Which of the following is TRUE of a term rider when attached to a permanent life policy? A It always is in the amount of the base policy B It only pays out a death benefit in cases of accidental death C It allows the policy to achieve paid up status at the end of the term D It can provide additional temporary coverage on the insured or on other members of the family
D It can provide additional temporary coverage on the insured or on other members of the family A term rider provides additional death benefit on the primary insured or other named insureds. At some point, the coverage becomes unaffordable, can be converted, or it expires.
Which of the following is not a duty that the Commissioner must administer? A Administer the Workers' Compensation system B Enforce the state insurance laws C Approve an insurance license for a producer D Make state insurance laws
D Make state insurance laws The Commissioner does not make or establish state insurance laws.
How is Variable Whole Life different from Variable Universal Life? A It is designed to provide a hedge against inflation B The policy owner takes on all of the investment risks C Cash values can be invested in a separate account D The policy has a guaranteed minimum face amount
D The policy has a guaranteed minimum face amount Generally speaking, Variable Whole Life has a guaranteed minimum death benefit provided that all premiums are paid in full and on time as scheduled, whereas a Variable Universal Life policy has no guaranteed death benefit.
If a client owns an indexed product, what happens if the market falls in value by a large amount? A The policy's losses must first be made up before any future interest can be credited B The policy's values are reduced in proportion to the loss C The policy's values are reduced on a dollar-for-dollar basis D The policy's values can never decline due to negative index performance
D The policy's values can never decline due to negative index performance When the market declines, the policy is credited with the minimum guaranteed interest rate or zero interest. The policy's values can never be impaired due to negative index performance.
Universal Life is similar to Whole Life in all of the following ways, except: A. Any internal cash value growth is tax-deferred B. It provides a death benefit C. Cash values accumulate based on premium deposits and interest D. The timing and amount of premium is flexible
D The timing and amount of premium is flexible Like ordinary Whole Life (WL), Universal Life (UL) Insurance features insurance protection and a savings element that grows on a tax-deferred basis. However, UL offers flexible premiums whereas WL does not.
How long, typically, is the reinstatement period from policy lapse? A Indefinitely B 2 years C 1 year D 3 years
D 3 years Typically, the reinstatement period is three years, but it can be up to 5 years with some policies or some insurers.
Which type of policy determines benefits based on a relative value scale? A Hospital indemnity B Major medical C Dental expense D Basic surgical expense
D Basic surgical expense Basic surgical expense plans determine benefits based on either a surgical schedule or a relative value scale, which assigns a value to a procedure with the highest level of difficulty and benefits for all other covered procedures are based on a percentage.
Which clause in a contract would state that Jim is covered by XYZ insurer for a monthly benefit of $2,000 in the event of disability? A Consideration Clause B Free Look Provision C Entire Contract D Insuring Clause
D Insuring Clause The Insuring Clause states who is covered, by whom, for how much, for what period, and against what peril.
Why have many states prohibited STOLI/IOLI transactions? A Consumers are not reporting the cash received as taxable income B The amount the policyowner obtains is too little in relationship to the death benefit C Mostly the investors are not licensed to conduct such a transaction D It is a violation of the insurable interest rule
D It is a violation of the insurable interest rule The practice of STOLI and IOLI has resulted in fraudulent abuses causing many states to outlaw STOLI and IOLI policies due to a lack of insurable interest.
Quentin, age 65, has a life insurance policy he no longer needs and no longer can afford, but he does have a need for cash. XYZ Inc. purchased his policy for less than the face amount but more than the cash value and is now the policyowner and premium payor. This was which of the following transactions? A Viatical Trust Settlement Agreement B Living Needs Transaction C Buy/Sell Agreement D Life Settlement
D Life Settlement A Life Settlement is like a Viatical Settlement except it does not involve a terminally ill insured.
All of these are payment structure options, except: A Usual, Customary, Reasonable (UCR) B Fee-for-service C Prepaid D Monthly Limit
D Monthly Limit The payment structure options are: fee-for- service, prepaid, UCR, lifetime limit, annual limit, and per-cause.
What taxes apply to the benefits under an individual Disability Income Policy on which the insured has paid the premiums? A Capital gains tax B FICA tax C Income tax D No tax
D No tax Benefits received from an individual Disability Income Policy are not subject to taxation.
A surgical procedure with a high level of difficulty is assigned a value and benefits for all other procedures are paid based on a percentage of that value. These benefits are determined using a: A Surgical schedule B Coinsurance C Flat benefit D Relative value scale
D Relative value scale A relative value scale assigns a value to a procedure with the highest level of difficulty and benefits for all other covered procedures are based on a percentage. A surgical schedule fee specifies benefit dollar limits for each covered surgical procedure.
What is an annuitant, in regard to an annuity policy? A The issuer of the policy B The person who has all of the rights in the contract C The party who receives any residual policy benefits D The party whose life the policy's benefits are based on
D The party whose life the policy's benefits are based on An annuitant is the individual whose life the contract is based upon.
How is Variable Whole Life different from Variable Universal Life? A Cash values can be invested in a separate account B The policyowner takes on all of the investment risk C It is designed to provide a hedge against inflation D The policy has a guaranteed minimum face amount
D The policy has a guaranteed minimum face amount Generally speaking, Variable Whole Life has a guaranteed minimum death benefit provided that all premiums are paid in full and on time as scheduled, whereas a Variable Universal Life policy has no guaranteed death benefit.
How long would a policyowner have to pay premiums on a term life policy to age 65 that was taken out at age 35? A Whenever the insured dies B 30 years C To age 65 D To the earlier of the insured's death, or to age 65
D To the earlier of the insured's death, or to age 65 The policyowner would pay premiums to the earlier of the insured's death, or to age 65.
Which of the following term life insurance policies would have the highest 1st-year annual premium, all other factors being equal? A. 10-year B. 1-year C. 5-year D. 15-year
D. 15-year The 15-year term life insurance policy would have the highest first-year premium of the choices provided. In essence, there is a slight overcharge in the early years, to be able to level out the premium for the balance of the years.
What is the name of the person named in the annuity contract to potentially receive any residual benefits? A Beneficiary B Insured C Annuitant D Owner
The beneficiary is the individual or person named in the contract to potentially receive benefits if the owner and/or annuitant die prior to annuitization or if the settlement option selected offers any residual benefit after the annuitant's death.
