CA Life Insurance 2022

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What would be an expense factor in an insurance program?

Mortality costs

Pam is the primary beneficiary of a life insurance policy and wants to let the death benefit accumulate and receive only the monthly investment proceeds. Which settlement option should she choose?

Interest Option

Which of the following in NOT a primary objective of insurance regulation?

Interpret policy provisions

Sharon is the policyowner of a $50,000 life insurance policy. Her son, Mike, is the beneficiary. If Sharon MUST obtain Mike's signature in order to change the beneficiary, what kind of beneficiary designation is this?

Irrevocable

Which of the following statements regarding a life insurance policy divided is TRUE?

It is the distribution of excess of funds accumulated by the insurer on participating policies

All of the following statements correctly describe the purpose of Social Security EXCEPT

It provides a source of income for a meaningful standard of living during retirement

The California Insurance Code requires that an insurer must have enough assists to cover its liabilities and for reinsurance of all outstanding risks. To remain solvent, it must also possess additional assets equal to what amount?

Its paid-in capital

What will the beneficiary receive if an annuitant dies during the accumulation period?

The greater of the accumulated cash value or the total premium paid

Which of these factors help determine an insured's life insurance premium?

avocation (hobby)

Preferred risk policies with reduced premiums are issued by insurance companies because the insured has

better than average mortality or morbidity experience

The period in which there are no Social Security benefits for the surviving spouse is called the

blackout period

Proceeds from a life insurance policy are protected from the beneficiary's creditors by which clause?

spendthrift trust clause

According to the California Insurance Code, what term is used to describe a fact so important it could affect the policy premium?

Materiality

The importance of a representation is demonstrated in what rule?

Materiality of concealment

Which of the following describes the number of deaths in a year compared to the number of people in a select group?

Mortality rate

The free-look provision gives the policyowner

the right to return the policy for a full refund within a specified number of days

Under a contract of adhesion,

the terms must be accepted or rejected in full

Legal purpose is a term used in contract law meaning

there must be legal reasons for entering into the contract

Which of the following statements correctly describes a contract of indemnity?

One party is restored to the same financial position the party was in before the loss occurred

Which of the following statements do NOT apply to child coverage in a family policy?

Only children born prior to policy's issue date may be included

How are survivorship life insurance policies helpful in estate planning?

Provide funds to help pay taxes

What is the primary reason for buying an annuity?

Provide future economic security

Which of the following is NOT a requirement for a terminated employee that has exercised the conversion privilige?

Provide proof of insurability

Non-deductible contributions are typically associated with a

Roth IRA

Which market index is normally associated with an indexed annuity's rate of return?

S & P 500

Which of the following enables a life policy to be replaced with another life policy and results in the postponement of the tax consequence?

Section 1035 exchange

The California Life and Health Insurance Guarantee Association covers all of these types of policies, EXCEPT

Self-funded plans

Karen is a producer who has obtained personal information about a client without having a legitimate reason to do so. Under the McCarran-Ferguson Act, what is the minimum penalty for this?

$10,000

Ron has a life insurance policy with a face value of $100,000 and a cost of living rider. If the consumer price index has gone up 4%, how much may Ron increase the face value of the policy?

$4,000

According to the California Insurance Code, what is the maximum penalty per violation for anyone who unwilfully commits an unfair method of competition?

$5,000

Employer-provided group term life insurance is exempt from income taxation up to

$50,000

Employee participation in a noncontributory group life plan must be

100%

Tonya has replaced her whole life policy with an annuity without incurring a tax penalty. This transaction is called a(n)

1035 Exchange

How long is a person expected to be disabled in order to receive Social Security disability benefits?

12 months

How long must an individual be unable to engage in any gainful activity due to physical or mental disability in order to qualify for Social Security Total Disability?

12 months

The free-look period for life insurance policyowners age 60 or older is

30 days

How many months can a life insurance policy normally be backdated from the date of application?

6

At what age is a surviving spouse without dependents eligible for Social Security survivor benefits?

60

According to the California Insurance Code, what is "insurance"?

A contract

Who is NOT eligible for Social Security survivor benefits?

A deceased worker's dependent parent of any age

Upon policy delivery, which of the following must a producer have an applicant sign if no initial premium was collected with the life insurance application?

A good health statement

A Modified Endowment Contract (MEC) is best described as

A life insurance contract which accumulates cash values higher than IRS will allow

Which of the following employers is required to follow ERISA regulations?

A local electrical supply company with 12 employees

Which of the following is an example of the insured's consideration?

A paid premium

What is an "insurance broker" according to California Insurance Code?

A person compensated for transacting insurance on behalf of another person with a insurer

Which of the following is NOT considered advertising?

A rating from a rating company, such as A.M Best

How is a life insurance policy dividend legally defined?

A return of excess premium and not taxable

what is the insurance term the State of California uses for an insurer that is eligible to transact business in this state?

Admitted

Which of the following is NOT considered to be an unfair claims settlement practice?

Advising a claimant to hire an attorney

When does as immediate annuity begin making payments?

After the first premium has been paid

An error was made on Mary's life insurance application. Which of the following areas are errors commonly made on applications for which the incontestable clause does NOT apply? Marital status Age Address Income

Age

which scenario would most life insurance policies exclude coverage for?

An individual who has a hobby racing cars once a month

Which of the following pieces of information is NOT gathered during the personal financial planning process?

An individual's civic organization memberships

Life insurance surplus must be distributed to policyowners at what frequency?

Annually

The deeds and actions of a producer indicate what kind of authority?

Apparent

Which of the following is NOT a true description of non-medical life insurance?

Applicants are not required to answer medical questions on the application

An applicant has revealed conditions that require more information. Which of the following is needed next?

Attending physician's statement

Why are dividends from a mutual insurer not subject to taxation?

Because dividends are considered to be a return of premium

Which statement is NOT true regarding Social Security benefits?

Benefits are design to replace the entire amount of the worker's earnings

Which of the following is NOT part of an insurance contract?

Certificate of Authority

Tim is covered under a group plan and would like to change his group coverage to an individual policy with the same insurer because of employment termination. Which of these describes the change that will take place?

Conversion

Tim was recently terminated from his employment and opted to change his existing group term life insurance to individual permanent life insurance. What is this process called?

Conversion

Which of these statements concerning Traditional IRAs is CORRECT?

Earnings are taxable when withdrawn

In what part of an insurance policy are policy benefits found?

Declarations

All of the following are examples of a Business Continuation Plan EXCEPT

Deferred Compensation

According to the California code governing claim settlement practices, which of the following is NOT considered to be an act of unfair discrimination?

Denial of a claim based on reckless behavior

Failure to report background changes within 30 days as required under section 1729.2 of the California insurance code could subject a license or applicant to

Denial, Fine, Suspension (All of these)

What is the primary purpose of a rating service company such as A.M Best?

Determine financial strength of an insurance company

What area of group health insurance is regulated under the Employee Retirement Security Act of 1974 (ERISA)?

Disclosure and reporting

Which of the following is NOT a component of determining policy premiums?

Dividends

Lisa has recently bought a fixed annuity. Which of these is considered to be a disadvantage of owning this type of annuity?

During periods of inflation, annuitants will experience a decrease in purchasing power of their payments

What is the name of the provision states that a copy of the application must be attached to the policy when issued?

Entire Contract

Peter has a policy where 80% to 90% of the premium is invested in traditional fixed income securities and the remainder of the premium is invested in contracts tied to a stipulated stock index. What kind of policy is this?

Equity index whole life

Craig purchased a life insurance policy for enabling his heirs to pay estate taxes. What is this called?

Estate conservation

An Insurance company needs to obtain personal information from a this party concerning an applicant. Which law do all insurers and their producers need to comply with?

Fair Credit Reporting Act

When handling premiums for an insured, an agent is acting in which capacity?

Fiduciary

All of these are characteristics of a universal life insurance policy EXECPT

Fixed surrender

Which type of worker has Social Security benefits available to them?

Fully insured

An annuitant is guaranteed to NOT outlive their benefits with a(n)

Guaranteed lifetime withdrawal benefit

What is an insurance solicitor authorized to do?

Help an agent or broker sell insurance

Which of these is a method of determining the level of funds required for ongoing support in the event of the breadwinner's death?

Human life value

What prevents a life insurance policy from being rescinded by the insurer after being in force for two years?

Incontestability clause

Which of the following contracts is defined as "one that restores an injured party to the condition that was present before the loss?

Indemnity contract

Which type of beneficiary should be named if the insured wants to give explicit directions on how the policy proceeds should be paid?

Individual

All of the following are characteristics of a Group Life Insurance EXCEPT

Individual underwriting

Which of the following is present when an applicant stands to lose value if the insured dies?

Insurable interest

Who is responsible for assembling the policy forms for insureds?

Insurance carriers

The Do Not Call Registry offers exemptions for calls placed from all of the following EXCEPT

Insurance sales calls

According to the California Insurance Code, who is responsible for submitting a life agent's appointment?

Insurer

Which of the following signatures is not required on an individual insurance application?

Insurer

When calculating life insurance premium rates, which component would an agent's commission fall under?

Insurer's expenses

Which of the following does the California Insurance Code NOT require an insurance policy to specify?

Insurer's financial rating

Jim is applying to become an insurance agent and has a past misdemeanor conviction that was later expunged due to California Penal Code 1203.4. Which of the following statements is correct?

Jim must still disclose the conviction on his insurance license application

The California Insurance Code has authorized standards for names used by life insurance agents. Which of the following, if any, are automatically acceptable for Lance Manyon, a holder of the CLU designation?

Lance Manyon Insurance Services

Which of the following best describes the statement "The more times an event is repeated, the more predictable the outcome becomes"?

Law of large numbers

Insurance companies determine risk exposure by which of the following?

Law of larger numbers and risk pooling

What type of license required for an individual who charges a fee to review an insured's existing life insurance policy?

Life and disability analyst

All of the following are examples of pure risk EXECPT

Losing money at a casino

Which of the following is considered to be any situation that has the potential for loss?

Loss exposure

What does the insurance term "indemnity" refer to?

Make whole

What is involved when a life insurance policy has been backdated?

Making the policy effective on earlier date than the present

Which word implies permissiveness according to the California Insurance Code?

May

Most U.S. life insurance companies belong to the

Medical Information Bureau

How does underwriting differ between group life and individual life insurance?

Medical questions must be answered on individual life insurance

Which of the following does the California Department of Insurance (CDI) have NO jurisdiction over?

Medicare

Mike and Ike are 30 year old identical twins. Both are in excellent health. Each brother purchases a life policy that has a $750 annual premium. Mike buys a 10-year renewable term policy. Ike purchases a whole life policy. All of the following statements are true EXCEPT

Mike has the option of using his cash value to purchase a reduced amount of paid-up whole life insurance

Which of the following acts is NOT a Federal offense committed by an insurance agent?

Misrepresentation on an insurance applicantion

What is the proper order of initial life insurance premiums, from lowest to highest?

Modified premium, ordinary life, single premium

Which of the following describes the increase in the probability of a loss due to an insured's dishonest tendencies?

Moral hazard

Joanne has a $100,000 whole life policy with an accumulated $25,000 of cash value. She would like to borrow $15,000 against the cash value. Which of the following statements is TRUE?

Net death benefit will be reduced if the loan is not repaid

How are Roth IRA's treated for tax purposes?

Non-deductible contributions and tax-free distributions

Shirley has a $500,000 10-year non-renewable level term life policy. If she dies 15 years after the policy's inception date, hoe much will her beneficiary receive?

Nothing

What is required after a life agent sells an insurance policy to an applicant without being appointed by the insurer?

Notice of appointment must be submitted to the Commissioner

An interest-sensitive life insurance policyowner may be able to withdraw the policy's cash value interest free. The provision that allows this is called

Partial Surrender

What is an insurance policy's grace period?

Period of time after the premium is due but the policy remains in force

According to the California Insurance Code, how is the word "may" interpreted?

Permissive

Variable life insurance and universal life insurance are very similar. Which of these features are held exclusively by variable universal life insurance?

Policyowner has the right to select the investment which will provide the greatest return

A person who is a nonsmoker, of average weight, and in excellent health would most likely be in which risk classification?

Preferred

AAA Insurance Company has transferred a portion of its loss exposure to BBB Insurance Company. In this reinsurance transaction, what is AAA Insurance Company called?

Primary insurer

Which of the following is NOT considered to be a definition of the term "loss"?

Probability that an event will occur

Which of the following is NOT considered to be an act of insurance solicitation?

Publishing a magazine where one of the advertisers is an insurer

Dana is an employee who deposits a percentage of her income into her individual annuity. Her company also contributes a percentage into a separate company pension plan. What kind of annuity is this considered?

Qualified retirement annuity

What is the price of insurance for each exposure unit?

Rate

When intentional concealment is involved, what course of action is the injured party entitled to?

Recession of the contract

A life insurance company has transferred some of its risk to another insurer. The insurer assuming the risk is called the

Reinsurer

Which course of action is the insurer entitled to when deliberate concealment is committed by the insured?

Rescinding the contract

Which of the following is a situation where there is a possibility of either a loss or a gain?

Speculative risk

An insurer's claim settlement practices are regulated by the

State insurance departments

Which of the following does NOT have to be included on life insurance policy illustrations?

Statement that all values and benefits are guaranteed

An insurer can be protected from adverse selection with which policy provision?

Suicide clause

The "blackout period" affects whose benefits?

Surviving spouse

Which type of multiple protection policy pays on the death of the last person?

Survivorship life policy

Which of these statements regarding the annuitant is CORRECT?

The annuitant's life expectancy determines the annuity payments

What is a corridor in relation to a Universal Life insurance policy?

The gap between the total death benefit and the policy's cash value

A creditor would be allowed rights to life insurance policy proceeds if which of the following beneficiaries is chosen?

The insured's estate

How do insurance predict the increase of individual risks?

The law of large numbers

Under the California Insurance Code, a licensee's license number must be printed at what size on all price quotes, business cards, and printed material?

The same size print as the licensee's phone number, fax number or address

What distinguishes a deferred annuity from an immediate annuity?

The time at which benefit payment start

Pete is a life agent who has misappropriated fiduciary funds to his own use. What is Pete guilty of?

Theft

What is the purpose of the Medical Information Bureau (MIB)?

To help underwriters evaluate risk

What does the term "indemnity" mean as it pertains to insurance?

To make whole

What is a common reason people purchase an annuity?

To protect against the risk of outliving their financial resources

An example of naming a beneficiary by class would be

To the children born of my union with Ned Jackson

A life insurance policy which contains cash values that vary according to its investment performance of stocks is called

Variable Whole Life

An annuity which is backed by a life insurer's separate account is called a(n)

Variable annuity

Bruce is involved in an accident and becomes totally and permanently disabled. His insurance policy continues in force without payment of further premiums. Which policy provision is responsible for this?

Waiver of premium provision

All of these statements concerning whole life insurance are false EXCEPT

When a whole life policy is surrendered, income taxes may be owed

When does a life insurance policy typically become effective?

When initial premium is collected and policy is issued

Which of these would be the best example of a limited pay life insurance policy?

Whole life policy with premiums paid up after 20 years

A hazard can be best described as

a condition that may increase the likelihood of a loss occurring

When an insurer has met the qualifications necessary to transact business in California, it is said to be

admitted

An insurance company entitled to transact business in California is called a(n)

admitted carrier

People with higher loss exposure have the tendency to purchase insurance more often than those at average risk. This is called

adverse selection

An individual most likely will have an insurable interest insuring a person's life if

an economic interest exists for the continuance of the insured's life

A change in an insurance application requires

an initial made by the applicant

A contract requires

an offer and acceptance of the contract terms

The systematic liquidation of a sum of money is provided by a(n)

annuity

A person who asset a right of recovery under an insurance policy is called

claimant

Life insurance policies will normally pay for losses arising from

commercial aviation

An agent's attempt to stop the replacement of an existing life insurance policy is known as

conservation

The least expensive option to pay off a 30-year mortgage balance would be

decreasing term life

A savings vehicle designed to first accumulate funds and then systematically liquidates the funds is called a(n)

deferred annuity

Level premium permanent insurance accumulates a reserve that will eventually

equal the face amount of the policy

A life insurance policy normally contains a provision that restricts coverage in the event of death under all of the following situations EXCEPT

fare-paying passenger

Victoria owns a life annuity and elects to receive annuity payments monthly for the remainder of her life with "ten years certain". Her annuity will make payments

for a minimum of 120 months and a maximum of the remainder of her life

An individual that has 40 quarters of coverage, for Social Security purposes, is considered to be

fully insured

An insured's status under Social Security can be described as

fully insured

Which policy provision protects the policyowner from unintentional lapse of the contract?

grace period

A life insurance rider that allows an individual to purchase insurance as they grow older, regardless of insurability, is called a(n)

guaranteed insurability rider

The Human Life Value concept is based on

income

Moral hazard is described as the

increased chance of a loss because of an insured's dishonest tendencies

The conversion privilege under a group life plan allows an employee to convert to a(n)

individual plan upon employment termination

Which settlement option involves having the proceeds remain with the insurer and earnings paid on a monthly basis to the beneficiary?

interest only

A limited payment whole life policy provides

lifetime protection

The suicide clause of a life insurance policy states that if an insured commits suicide within a stated period from the policy's inception, the insurer will only be liable for a return of premiums paid

minus indebtedness and without interest

A beneficiary change can occur

normally at any time during the policy term

A nonparticipating policy will

not pay dividends

A unilateral contract is one in which

only one party (the insurer) makes any kind of legally enforceable promise

The cause of a loss is referred to as a(n)

peril

According to the principle of Utmost Good Faith, the insured will answer questions on the application to the best of their knowledge and pay the required premium, while the insurer will deal fairly with the insured and it's

promise made

The Fair Credit and Reporting Act's main purpose is to

protect consumers with guidelines regarding credit reporting and distribution

In order to activate the reinstatement clause of a lapsed life insurance policy, the insured MUST

provide evidence of insurability to the insurer

A situation in which there is ONLY a chance of loss or non loss is a

pure risk

An annuity is primarily used to provide

retirement income

Anyone employed in California to assist an insurance agent in transacting insurance is called an insurance

solicitor

A terminated employee that has exercised the conversion privilege is able to convert

term insurance into permanent insurance

Premiums are best described as

the amount an insured pays per unit of coverage

Converting a group plan to permanent life insurance requires

the conversion being applied for within 31 days of termination

An insurer having a large number of similar exposure units is considered important because

the greater the number insured, the more accurately the insurer can predict losses and set appropriate premiums

An insured individual and the policy's beneficiary die from the same accident. The common disaster provision states the insurer will continue as if

the insured outlived the beneficiary

If the annuitant dies before the annuity start date,

the premiums paid plus interest earned will be given to the beneficiary

Dorian exercised a nonforfeiture option by using his life policy's cash value to purchase an extended term insurance option. When the term insurance expires,

the protection ends

An insurer that has been found using higher rates based on race, religion, or ethnicity is said to be engaging in

unfair discrimination

Paul has an existing annuity and is sold a new one, in which the new policy holds no greater financial benefit to him than the existing contract. This is considered a(n)

unnecessary replacement

Under a Traditional IRA, interest earned is taxed

upon distribution

A life insurance policy where the insured can choose where the cash value can be invested is called

variable life

Life insurance creates an immediate estate. This phrase means:

when the insured dies, a death benefit is paid

A renewable Term Life insurance policy allows the policyowner the right to renew the policy

without producing proof of insurability

A worker is entitled to Social Security disability benefits if all of the following are true, EXCEPT for:

worker cannot perform his or her current job, but is actively seeking other employment


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