Exam FX practice
Which of the following is the closest term to an authorized insurer?
Admitted Insurers who meet the state's financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer.
Which of the following would NOT be a violation of state insurance regulations?
Agent C uses her license to write only business other than controlled. The purpose of a license is to primarily write business other than controlled business.
All of the following are personal uses of life insurance EXCEPT
Buy-sell agreement
Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?
Cash surrender Once the cash surrender value is paid, the contract is over.
Which of the following is NOT a responsibility of the Office of Insurance Regulation?
Enacting new insurance laws New laws are enacted by the state legislature
An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming?
Foreign A foreign insurer is domiciled in one state and transacts insurance in another. A domestic insurer transacts insurance in the domicile state (in this case, Montana). An alien insurer is domiciled in one country and transacts insurance in another.
The automatic premium loan provisions is activated at the end of the
Grace period
Stranger-Originated Life Insurance (STOLI) policies are in direct opposition to the principle of
Insurable interest because the purchaser of a stranger originated life insurance policy doesn't know the insured, or have any interest in the insured's longevity, STOLI policies violate the principle of insurable interest
Which of the following terms means a result of calculations based on the average number of months the insured is projected to live due to medical history and mortality factors?
Life expectancy Life Expectancy is an important concept in life settlement contracts. It refers to a calculation based on the average number of months the insured is projected to live due to medical history and mortality factors (an arithmetic mean)
An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called?
Profit sharing plan. A profit sharing plan is one where the employer will contribute monies into an employee's retirement plan when the company shows a profit. The others are all qualified plans, but company profit isn't an issue with them.
When an insurer terminated an agents appointment the insurer must do all of the following except
Provide a 30 day advance notice to the commissioner An appointing entity may terminate an agents appointment time at any time, subject to an appointees contract rights and with a 60 days advanced notice. Once the appointment is terminated the appointing entity must file a written notice with the department of insurance within 30 days.
The clause that protects the proceeds of a life insurance policy from creditors after the death of the insured is known as the
Spendthrift clause The spendthrift clause protects the policy proceeds from the creditors of the policy owner or beneficiary.
How will a life insurance beneficiary designation naming a spouse be changed by divorce?
The beneficiary designation will be voided. If a former spouse of the policyowner is designated as the life insurance policy beneficiary, the beneficiary will be void at the tine the policyowner's marriage is legally dissolved (divorce) or declared invalid by court order if the designation was made prior to the divorce.
Which of the following best describes what the annuity period is?
The period of time during which accumulated money is converted into income payments
In terms of parties to a contract, which of the following does NOT describe a competent party?
The person must have at least completed secondary education
Which of the following is an example of a producers fiduciary duties?
The trust that a client places in the producer in regard to handling premiums An agent acts in a fiduciary capacity, based upon trust and confidence, when handling the financial affairs of their customers, including the handling of premiums
In a survivorship life policy, when does the insurer pay the death benefit?
Upon the last death Survivorship life pays on the last death rather than upon the first death
Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured?
Variable option Under Option B the death benefit includes the annual
The premiums paid by the employer in a business life insurance policy are
Tax deductible by the employer
Which of the following is an example of a producer being involved in an unfair fraud practice of rebating?
Telling the client that his first premium will be waived if he purchases the insurance policy today Rebating is defined as offering any inducement in the sale of insurance products that is not specified in the in the policy, including money, reductions to commission, promises, and personal service. Both the offer and acceptance of rebate are illegal.
Under special circumstances, continuing education requirements may be extended beyond the 2-year period for a maximum period of
12 months Excess classroom hours accumulated during any 2-year period may be carried forward to the next 2-year period. If good clause is shown, the department may grant an extension not to exceed 1 year.
A licensed agent should complete how many hours of continuing education specific to ethics and regulatory updates?
5 Out of the 24 CE hours agents are required to complete a 5-hour update course, which covers ethics, regulatory updates and trends
When a life insurance policy stipulates that the beneficiary will receive payments in specified installments or for a specified number of years, what provision prevents the beneficiary from changing or borrowing from the planned installments?
Spendthrift provision When a life insurance policy contains a spendthrift provision, all rights of the beneficiary to change time of payments or amount of installments, surrendered for cash, borrow against, or assign for any purpose, are withdrawn and those parts of the policy that may give the beneficiary such rights are declared inoperative and void.
The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called
Waiver of premium
An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin?
When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health
When does a free-look period begin on a life insurance policy?
When the policy is delivered to the insured The free-look provision allows an insured a period of specified number of days from the delivery date of the policy to look over a new policy and return it for a full premium refund if dissatisfied for any reason.
Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the will be obtained?
3 days
In insurance, an offer is usually made when
An applicant submits an application to the insurer
The inclusion of the Life and Health Guaranty Association in advertisement by an insurer is
Forbidden No insurance company can advertise the existence of the Guaranty Association; not can an agent bring up the c in a sales presentation.
Which of the following statements is true concerning the Accidental Death Rider?
It will pay double or triple the face amount
Which of the following documents must be provided to the policy owner or applicant during policy replacement?
Notice Regarding Replacement During a policy replacement, the replacing producer must present to the applicant a Notice Regarding Replacement that is signed by both the applicant and the producer.
A rider attached to a life insurance policy that provides coverage on the insured's family member is called the
Other-insured rider
An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do?
Pay a reduced death benifits
When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to
Purchase a single premium policy for a reduced face amount
If an employer decided to change its life insurance policy to a similar one with a different insurer, which of the following describes the extent that replacement regulations will be exercised?
Replacement regulations will not apply in this situation. If a new life insurance policy is provided under a group life insurance policy covering employees or members of an association, replacement regulations do not apply.
When may an insurance company use suicide as a defense against paying a death claim?
When death occurs within a specified period of time after the policy was issued. An insurance company can deny a claim if the death of the insured was by suicide and occurred within a time specified in the policy.
What is a foreign insurer?
An insurer with a home office in another state. A domestic insurer's home office in this state, a foreign insurer's is in another state and an alien insurer is in another country.
At the time the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability. This rider is called
Guaranteed insurability
Annually renewable term policies provide a level death benefit for a premium that
Increases annually Annually renewable term policies provide a level death benefit for a premium that increases each year with the age of the insured.
The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had an income for life after the insured's death, he chose the life income settlement options. The amount of payment will be determined by taking into account all of the following EXCEPT
The insured's age at death
All of the following benefits are available under Social Security EXCEPT
Welfare benefits Social security is an entitlement program, not a welfare program.
When a group policy terminates, each individual insured under the policy will be entitled to have an individual policy if insured has been insured under group policy for at least how many years prior to policy termination?
5 years When a group policy terminates, each individual insured under the policy at the date of such termination who has been so insured for at least 5 years prior to such termination date will be entitled to have issued to him by the insurer and individual policy of life insurance.
In life policies issued in this state, insurers are permitted to charge interest during the policy grace period for the number of days elapsing before the premium is paid. What is the maximum annual interest rate?
8% The time that may elapse between a premium's due date and its eventual payment is called the grace period. Insurer's may impose interest charges not to exceed 8% per years for the number of days elapsing before the premium is paid.
An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date?
The date of medical exam
Which of the following dates must be contained in a policy summery?
The date the summery was prepared A policy summery must contain the date that the summery was prepared.
When a life insurance policy was issued, the policyowner designated a primary and a contingent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident, and it as impossible to determine who died first. Which of the following would receive the death benefit?
The insured's contingent beneficiary
If an insurer issued a policy based on the application that had an answered questions, which of the following will be true?
The policy will be interrupted as if the insurer waived its rights to have an answer on the application.
If an insured continually uses the automatic premium loan option to pay the policy premium,
The policy will terminate when the cash value is reduced to nothing
What is the purpose of settlement options?
They determine how death proceeds will be paid
which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated?
Those who have been insured under the plan for at least 5 years If the master contract is terminated, every individual who has been on the plan for at least 5 years will be allowed to convert to individual insurance of the same coverage
Which of the following types of policies allows for a flexible premium and a variable investment component?
Variable universal life insurance A variable universal life insurance policy combines a flexible premium with an investment component that allows for potentially great returns.
An insurance producer just sold an insurance policy to his sister. What kind of business is this?
controlled When producers sell policies on themselves, their family, or their coworkers, this is called controlled business. Controlled business is legal as long as premiums paid on these premiums that the producer writes for other business
Under what conditions will proof of insurability NOT be required of an employee wanting to enroll in a group insurance plan?
if employee enrolls within certain time period In group insurance, evidence of insurability is usually not required if participant enrolls during the open enrollment period, and participants (insureds) under the plan do not receive a policy, nor do they own or control the policy. Instead, they receive certificates, indicating that they are included in the coverage