CA Life Insurance Exam [Review Questions]

An agent who violates the replacement provision of the Code will be fined...

$1,000 for the first offense

the free look period for newly issued life insurance policies in this state is...

10 days is the minimum

The insured is also the policyowner of a whole life policy. What age must the insured attain in order to receive the policy's face amount?

100

how many continuing education hours must a producer complete on the subject of ethics every licensing period?

3 hours

The number of credits required to obtain a fully insured status to receive Social Security benefits is..

40

According to the California Insurance Code, life-only agents must keep record of their transactions for...

5 years

Medical Information Bureau (MIB) is

A source of medical information to alert insurers to adverse medical history

An insured submits the full premium along with a completed application, and the policy is issued 10 days later. When does the coverage begin?

Date of application

When would a misrepresentation on the insurance application be considered fraud?

If it is intentional and material

Under what circumstances will be contingent beneficiary receive the death benefit?

If the primary beneficiary dies before the insured

If a licensee changes his or her residence address, within how many days must the department be notified?

Immmediately

Which provision states that if a policy for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost?

Indemnity

If an agent feels that there could be misrepresentation on the part of the applicant for insurance, what must the agent do?

Inform the insurance company

A life policy has a legal purpose if both of which of the following elements exist?

Insurance interest and consent

Which of the following is an example of a limited-pay life policy?

Life Paid-up at Age 65

which type of annuity settlements stops when the annuitant dies?

Life annuity

In a single employer group plan, what is the name of the policy issued to the employer?

Master contract

which of the following is NOT true regarding policy loans?

Money borrowed from the cash value is taxable.

The price of insurance for each unit of exposure is know as...

Rate

If an agent fails to obtain an applicants signature on the insurance application, the agent must...

Return the application to the applicant for signature

the commissioner of insurance is responsible for all of the following actions EXCEPT..

Setting premium rates

A producer's license may be suspended or revoked for all of the following reasons EXCEPT

Sharing commissions with another agent

An insurance policy that only requires a payment of premium at its inception and provides insurance protection for the life of the insured and endows at the insured's age 100, is called..

Single premium whole life

In insurance contracts, a warranty is a...

Statement that must be true

The advantage of qualified plans to employers is

Tax-deductible contributions

The advantage of qualified plans to employers is...

Tax-deductible contributions

An individual owns an adjustable life policy. Sometime in the future he wants to increase the death benefit. Which of the following statements is correct regarding this change?

The death benefit can be increased by providing evidence of insurability

Which of the following methods of calculating the amount of life insurance needed takes into account the insured's salary and years until retirement?

The human life value approach

Which of the following does NOT need to be identified in an insurance policy?

The insurer's financial rating

Which of the following would NOT be eligible for coverage under key person insurance ?

The owner of a shop

Which of the following is true regarding a joint life policy

The premium is based on the average age of the insureds

Who acts on behalf of the principal?

agent

Profitable distribution of exposures is achieved when poor risks are...

balanced with preferred risks and average risks are in the middle

if a policy does not pass the 7-pay test, that pollicy

becomes a Modified Endowment Contract (MEC)

Purpose of errors and omissions insurance protects agents against...

charges that they didn't properly serve a client

Example of Morale hazard is..

driving reckless (careless, irresponsible because he/she will be covered)

In group life policies, individual are given to..

each insured person

What is the main responsibility of a company's underwriting unit?

risk selection and classification

Reciprocal insurance option is...

risk-sharing arrangement

An annuity begins payments to the annuitant one month after it is purchased. what type is it?

single premium immediate annuity

the guaranteed insurability options allows the insured to purchase specific amounts of additional insurance at...

specific times without proving insurability

When money is withdrawn from the annuity during the accumulation phase the amounts are...

taxed on a last in first out basis (LIFO)

Adverse selection means..

that there are more risks with high probability of loss seeking to purchase and maintain that the risks who present lower probability. Underwriters must guard against this.

A certificate of authority is required...

to transact insurance

The time period during which an annuitant contributes to an annuity is called

Accumulation period

A producer CANNOT receive a commission from an insurance company without which of the following?

An appointment with the company

when an annuity is written, whose life expectancy is taken into consideration?

Annuitant

Annulization period refers to..

Annuity, liquidation, or pay-out period

All of the following are nonforfeiture options in life insurance policies EXCEPT...

Automatic premium loans

An insurance contract must contain all of the following elements to be considered legally binding EXCEPT..

Beneficiary's consent

When must insurance interest exist in life insurance?

Date of application

When the insured purchased a new home, he wanted to purchase a life insurance policy that would protect his family against losing it should he die before the mortgage was paid. Which of the following policies is inexpensive for that need?

Decreasing term

Annuities may be purchased with all of the following payment methods EXCEPT

Deferred

which of the following is NOT a standard exclusion in life policies?

Disability

In an insurance contract, consideration refers to..

Exchange of something of value by both parties

Which of the following best describes the aleatory nature of an insurance contract?

Exchange of unequal values

Which of the following are Social Security benefits?

Retirement, disability and survivors

if the department issues a cease and desist order, that means the insurer must...

Stop committing a particular violation

which of the following insurance arrangements will be appropriate for a business purchasing life insurance on its general manage?

Third-party ownership

what is the main role of solicitor of insurance?

To aid insurance agents in transacting insurance

Which method of dealing with risk is applied when a person purchases insurance?

Transfer

Risk in insurance terminology refers to

Uncertainty of financial loss

The insurer must be able to rely on the statements in the application, and the insured must be able to rely on the insurer to pay valid claims. In the forming of an insurance contract, this is referred to as

Utmost good faith

Because of an injury, an insured has been unable to work for 7 months. He wasn't able to pay his life insurance policy premium, yet the policy remained in force. The policy includes

Waiver of premium rider

A spouse receives $5,000 a month until the principle and interest on her husband's life insurance policy have been paid out. Which settlement option did this beneficiary choose?

a fixed amount

An insured has the right to return the new Insurance policy for...

a full refund during the free-look period

Joint life annuity settlement option ...

pays benefits to 2 or more annuitants, but stops upon the death of the first

All of the following are examples of risk retention EXCEPT...

premiums

With a traditional whole life policy, the death benefit

remains constant over time

If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may..

require evidence of insurability

annuity period may last for...

the life time of the annuitant

in a life settlement contract, whom does the life settlement broker represent?

the owner

the cost of living rider annually adjusts

the policy's face value in accordance with the national rate of inflation or deflation

which of the following statements is true about annuitants?

they can provide a lifetime income

annuities can be used for all of the following EXCEPT

to create an estate

Which of the following in NOT a type of hazard?

Exposure

With personal life insurance, the lump-sum death benefit is received by the beneficiary..

Income tax free

Which of the following terms refers to an unintentional tort?

Negligence

An annually renewable term policy

Renews each year with an increased premium

The annuity period is...

The period of time during which accumulated money is converted into income payments

Which of the following is considered a field underwriter?

an agent

Generally, the premium paid for personal life insurance is..

Not taxed deductible

In order to reinstate a life insurance policy the insured must do all of the following EXCEPT

Pay next year's premium in advance

If no receipt is issued at the time of application, a statement of good health is usually required at the time of...

Policy delivery

Which of the following describes specific information about policy provisions and benefits?

Policy summary

Equation for income taxable..

Premiums Paid - Cash Value = Income Taxable

the insured pays $1,200 annually for her life insurance premium. This year, she has accumulated $175 worth of dividends, which she applies to her next premium, thus reducing it to $1,025. what dividend option has the insured chosen?

Reduction of premium

The insurer must submit...

an updated list semiannually of all agents authorized to solicit long term care insurance

Which of the following would be the main source of underwriting information used by the company in the risk selection process?

application

The annuitant CANNOT be the same person...

as the annuity owner.

which of the following terms refers to the transfer of some or all of the ownership rights of a life insurance policy from one individual to another?

assignment

an individual inherited a large sum of money at age 40 and wanted to use it to provide a guaranteed income after his retirement at age 60. which of the following types of annuities would best meet this need?

deferred

The accidental death rider will pay...

double or triple the face amount

If a deferred annuity is surrendered prior to annuitization, is guaranteed...

due to the nonforfeiture provision

an annuity guarantees a minimum rate of return is known as/an..

fixed annuity

An individual who has earned income can make a...

fully deductible contribution to a traditional IRA

Conditions that increase the chances of an insured loss occurring are referred to as...

hazards

A substandard risk compared to a standard risk would pay..

higher premium

Who bears the investment risk in a fixed annuity?

insurance company

which of the following is true about mandatory free-look period in a life insurance policy?

it begins when the policy is delivered.

which of the following is NOT a requirement of a qualified plan?

it must be temporary

According to California Insurance Code, the term "shall" describes what kind of actions?

mandatory

When a death claim is submitted, the insurer discovered that the insured understated her age on the application for a life policy. What action will the insurer take?

pay a reduced death benefit based on the insured's actual age