Chapter 2

An agent who violates any replacement regulations is liable for an administrative penalty of no less than how many dollars for the first violation? A $250 B $500 C $750 D $1,000

$1,000

Policy delivery in California will be accomplished by all of the following, except: A Registered or certified mail with a signed receipt of delivery B First-class mail with a signed receipt of delivery C Personal delivery with a signed receipt of delivery D Calling the applicant/insured to inform him/her that the policy was issued and keep in the client file

Calling the applicant/insured to inform him/her that the policy was issued and keep in the client file

Which of the following personal uses of life insurance is specifically designed to provide benefits to the policyowner while the insured is still alive? A Estate creation B Charitable bequests C Cash accumulation D Estate conservation

Cash accumulation

A current and prior HIV positive test result (two positive blood tests) may be the basis for a life insurer to: A Offer the coverage at no better than a standard rate B Require the applicant/insured to pay for the HIV test C Decline the application for life insurance D Issue the policy with an exclusion

Decline the application for life insurance

The date on which insurance coverage is no longer in effect is referred to as the _________ date. A Conversion B Policy C Expiration D Renewal

Expiration

Ultimately it is up to the _______ to determine if the proposed insured is an acceptable risk. A Home office actuary B Insured's primary care physician C Home office underwriter D Field underwriter

Home office underwriter

Life insurance applications cannot contain questions about prior HIV testing unless the question is limited to prior testing for the purpose of obtaining: A A gun permit B Insurance C A drivers license D Employment

Insurance

What is an insurer permitted to do if and when it discovers during the underwriting process that a proposed insured has AIDS? A Insurers can discriminate between individuals of the same class in underwriting for the risk of AIDS B The insurer can share information discovered during the underwriting process with the Center for Disease Control as well as state and local health authorities C Insurers may refuse to issue a policy to individuals based on positive HIV test results D Insurers can share the test results with the insured's immediate family members and any health professionals listed on the application

Insurers may refuse to issue a policy to individuals based on positive HIV test results

Interest earned on premiums paid to an insurer helps to ________ the premiums charged. A Increase B Standardize C Stabilize D Lower

Lower

If premiums were submitted at the time of application, when is a life insurance policy considered constructively or legally delivered by the insurer? A Once the insurer mails the issued as applied for policy to the producer B At the time of application if premiums were collected and a conditional coverage receipt was issued by the producer C At the time the producer receives the rated policy and is required to collect additional premiums D Once the producer delivers the policy to the applicant and obtains a signed delivery receipt

Once the insurer mails the issued as applied for policy to the producer

In order to receive a policy dividend, the policy owner must own a __________ policy. A Industrial B Participating C Ordinary D Group

Participating

Policies that may pay dividends to the policyowner are known as: A Proactive B Mutual C Participating D Interactive

Participating

In a replacement transaction, why should the existing policy not be terminated until the replacing policy is issued and delivered? A Potential loss of premiums B Potential of new evidence of insurability being required C Potential loss of cash values or dividends D Potential loss of earnings

Potential of new evidence of insurability being required

Regarding insurable interest which one of the following is false? A An insurable interest exists in cases where a financial or economic loss by the insured results in the event that the policy owner dies B A creditor has an insurable interest in one of their debtors C A parent has an insurable interest in his/her son or daughter D An individual has an insurable interest in his or her own self

A creditor has an insurable interest in one of their debtors

Under California life insurance replacement legislation, conservation is defined as: A An attempt on the part of the replacing insurer to have one of their policies replace 2 of the existing insurer's policies B Any transaction in which new life insurance is to be purchased and it is known to the agent that existing insurance will be forfeited, lapsed, or surrendered C An attempt by the existing insurer or agent to keep a policy in force where replacement is contemplated D Replacing an existing policy with a new policy in order to reduce premium

An attempt by the existing insurer or agent to keep a policy in force where replacement is contemplated

When the initial premium is not paid with the application, what must the producer do before coverage can begin? A Collect the premium and obtain a signed Statement of Good Health from the applicant/insured at time of policy delivery B Deliver the policy if it is issued and obtain a policy delivery receipt C Collect and submit the outstanding premium to the insurer within the free look period D Obtain a signed State of Good Health and policy delivery receipt from the applicant/insured when the policy is delivered

Collect the premium and obtain a signed Statement of Good Health from the applicant/insured at time of policy delivery

Any attempt by the existing insurer or agent to deter a policyowner from the replacement of an existing life insurance or an annuity is called: A Conservation B Servicing C Anti-consumerism D Intimidation

Conservation

The Medical Information Bureau (MIB) is formed by: A The Government B Employers C Insurance companies D Medical professionals

Insurance Companies

Which of the following is not a factor in premium determination? A Expenses B Mortality C Reserves D Interest

Reserves

What should the producer do, if the insured is in the hospital with a heart condition pending surgery on the day the newly issued policy was to be delivered? A Return the policy to the insurer with a letter of explanation B Deliver the policy to an immediate family member and collect any outstanding premium C Hold onto the policy until the insured is discharged from the hospital and then deliver the policy D Collect additional premium at the time of delivery to reflect the higher risk the insurer now faces

Return the policy to the insurer with a letter of explanation

A The insurer B The Insurance Commissioner's office C The NAIC D The Federal Department of Insurance

The NAIC

Premiums paid in advance are considered what type of premiums until coverage has been provided? A Unearned B Deposit C Residual D Earned

Unearned

In California, every person has an insurable interest in the life and health of all of the following, except: A Himself/herself B Any person who agrees to be insured C Any person on whom he/she depends wholly or in part for education or support D Any person under a legal obligation to him for the payment of money or respecting property or services, of which death or illness might delay or prevent the performance

Any person who agrees to be insured

Constructive or legal delivery occurs only if the premium was paid at the time of: A Solicitation B Policy delivery C Illustration D Application

Application

If a basic life insurance illustration is used by an insurance producer in the sale of life insurance and the policy is applied for as illustrated, a signed copy of that illustration must be submitted to the insurer and provided to the applicant: A At the time of policy delivery B At the first policy anniversary C At the end of the free look period D At the time of policy application

At the time of policy application

A STOLI transaction is best defined as which of the following? A Beneficiaries choosing one of the settlement options the policy provides B Beneficiaries selling the annuitized benefit they are receiving for immediate cash C Inducing insureds who do not need and cannot afford life insurance to buy a policy and sell it for cash D Electing a settlement option for the beneficiaries at time of application

Inducing insured who do not need and cannot afford life insurance to buy a policy and sell it for cash

Which of the following best describes a Statement of Good Health? A It verifies that the insured has not suffered a serious illness or injury requiring surgery or hospitalization since the application date B It is the producer's authority to raise the rate if the insured does not appear to be in good health at the time of policy delivery C It is a sworn oral statement made by the insured at time of delivery which allows for coverage to come into effect D It is what comes along with the policy at the time of delivery confirming the underwriting class the insured falls into if the policy was issued standard or better

It verifies that the insured has not suffered a serious illness or injury requiring surgery or hospitalization since the application date

Which one of the following will pay the highest premium for a life insurance policy all other factors being equal? A Male age 65 B Female age 65 C Female age 70 D Male age 70

Male age 70

If after a policy has been issued and delivered, the insurer discovers unanswered questions on the application, what can the insurer legally do at this point? A Require the applicant/insured to answer the questions and re-underwrite the policy B Nothing, the insurer has waived its right to that information C Cancel the policy D Increase the policy's premium

Nothing the insurer has waived its right to that info

If it is known or should be known by the agent that an existing policy is going to be lapsed, forfeited, surrendered or terminated in favor of a new policy, the agent must submit a: A Statement of Release B Cancellation of Service C Notice of Conservation D Notice of Replacement

Notice of Replacement

Which of the following best describes producer field underwriting? A Obtaining the applicant's medical records, conducting a credit history check, and logging in to the MIB B Conducting blood pressure readings, taking the applicant's pulse, and drawing blood C Interviewing the applicant's neighbors about the applicant's morals and character D Taking the time to probe beyond the stated questions on the application based upon the applicant's responses

Taking the time to probe beyond the stated questions on the application based upon the applicant's responses

What type of a receipt provides immediate coverage during the underwriting period (rather than a specified number of days) until a policy is issued or the application is declined? A Temporary insurance agreement B Conditional C Guaranteed D Trial

Temporary insurance agreement

Which of the following is true? A Any changes to a policy must be approved by both the insured and policyowner in writing B The insured and the policyowner are usually the same, but not necessarily C The applicant, insured, and policyowner must approve any changes to a policy in writing D The insured and the policyowner are always the same

The insured and the policyowner are usually the same but not necessarily

In determining the proper amount of life insurance, the Needs Analysis Approach takes into consideration all of the following factors, except: A The projected future value of services provided by the insured B The paying off of personal debts, medical bills, and final expenses C The payoff of any outstanding mortgage balance D The creation of college funds for surviving children

The projected future value of services provided by the insured

In California, in a replacement situation, it is recommended that an existing policy not be terminated until: A The existing policy has been in force for at least 5 years B The application for the replacing policy has been completed C The existing policy has been in force for at least 10 years D The replacing policy is issued and delivered

The replacing policy is issued and delivered

Before the process of underwriting begins, who will make the final determination as to whether insurable interest exists? A The applicant B The underwriter C The agent D The insured

The underwriter

Every insurer and life agent offering for sale individual life insurance policies, or individual annuity contracts that are issued for delivery to senior citizens in California with the use of non-preprinted illustrations of non-guaranteed values must disclose on those illustrations, or on an attached cover sheet, which one of the following statements? A Contact the Insurance Commissioner to find out what the actual performance of similar policies have been in the past B This is an illustration only which is not intended to predict actual performance, therefore interest rates, dividends, or values that are contained herein are not guaranteed, except for those items clearly labeled as guaranteed C Make sure that you are dealing with a licensed agent/producer who has a professional industry recognized designation D This illustration is unique in that it is custom designed to meet your particular needs and objectives so comparisons with other company's policies is not recommended

This is an illustration only which is not intended to predict actual performance, therefore interest rates, dividends, or values that are contained herein are not guaranteed, except for those items clearly labeled as guaranteed

Life insurance policy illustration requirements apply to which one of the following? A Credit life insurance B Traditional whole life insurance C Variable life insurance D Individual and group annuity contracts

Traditional whole life insurance