Exam study questions
S set up an individual retirement account that her employer is now contributing to. Her employer's contributions are not included in her gross income. What kind of retirement plan does S have? a) 401k b) HR-10 c) SIMPLE d) Simplified Employee Pension (SEP)
d
What is the time period called during which the surviving spouse of the insured does not receive Social Security income benefits? a) probationary period b) blackout period c) waiver of premium d) retention of capital
B
What method do insurers use to protect themselves against catastrophic losses? a) pro rata liability b) risk management c) reinsurance d) indemnity
C
An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have? a) adjustable life b) term life c) limited pay d) universal life
D
A distribution from an employer-sponsored retirement plan or from an IRA is eligible for a tax-free rollover if it reinvested in an IRA within a) 60 days b) 90 days c) 100 days d) 30 days
a
According to the Common Disaster clause, if the insured and primary beneficiary are killed in the same accident and it cannot be determined who died first, which of the following will be assumed? a) the estate of the primary beneficiary and the contingent beneficiary split benefits equally b) the insured died before the primary beneficiary c) the primary beneficiary died before the insured d) the deaths occurred at the same time
c
A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as a) survivor protection b) life planning c) survivorship insurance d) juvenile protection provision
A
Which concept is associated with "exclusion ratio"? a) dividend distribution b) how exclusion riders affect an insurance premium c) policy provisions d) annuity payments
D
Which of following is NOT true regarding Equity Indexed Annuities? a) the insurance company keeps a percentage of the returns b) they have guaranteed minimum interest rates c) they are less risky than variable annuities d) they earn lower interest rates than fixed annuities
D
Which of the following insurance options would be considered a risk-sharing arrangement? a) stock b) mutual c) surplus lines d) reciprocal
D
If a loan request is for payment of due premiums on the policy, how soon must the insurer issue a loan? a) immediately b) within 10 days c) within 30 days d) within 90 days
a
In a deferred annuity, the difference between the accumulation value and the surrender value is the a) surrender charge b) mortality charge c) interest credit d) front end load
a
Which of the following statements is incorrect concerning Modified Endowment Contracts? a) An MEC must always pass the 7-pay test b) A life insurance policy failing the 7-pay test is classified as an MEC c) A primary purpose of the regulations governing MECs was to reduce incentives for the use of life insurance as a short-term investment vehicle d) A distribution from an MEC may be subject to a 10% penalty if withdrawn prior to 59 1/2
a
Bob moved into a new house 10 days ago. How much longer will he have to notify the Department of Insurance of the address change? a) 10 more days b) 20 more days c) today is the last day d) 5 more days
b
The Human Life Value approach to determining Life Insurance needs is based upon which of the following ideas? a) Replacement of assets b) Specific needs for college education c) Retirement needs d) Loss of the breadwinner's income
d
What is the cost of coverage based on for group life insurance? a) the average age b) the ration of men to women c) the insureds' individual ages d) the average age and the ratio of men to women
d
Which of the following would be considered an unfair claims settlement practice? a) advising the insured that if the claim goes to arbitration, the insured would probably receive less than what is currently being offered b) requesting the insured to submit a signed proof of loss statement, after the insured has already verbally advised the insurer of the claim c) requesting the insured swear under oath concerning the facts of the claim d) delaying the settlement of a claim for 30 days in order for the insured to conduct an investigation
a
All of the following are requirements for life insurance illustrations EXCEPT a) they must differentiate between guaranteed and projected amounts b) they must be part of the contract c) they may only be used as approved d) they must identify nonguaranteed values
b
After a back injury, an insured is disabled for a year. His insurance policy carries a Disability Income Benefit rider. Which of the following benefits will he receive? a) monthly premium waiver and monthly income b) percentage of medical costs paid by the insurer c) payments for life d) yearly premium waiver and income
A
All of the following are general requirements of a qualified plan EXCEPT a) the plan must be permanent, written and legally binding b) the plan must provide an offset for social security benefits c) the plan must be communicated to all employees d) the plan must be for the exclusive benefits of the employees and their beneficiaries
B
All of the following statements are true regarding installments for a fixed amount EXCEPT a) the payments will stop when the anntuiant dies b) value of the account and future earnings will determine the time period for the benefits c) this option pays a specific amount until the funds are exhausted d) the annuitant may select how big the payment will be
B
An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1; however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy? a) 0 b) 200 c) 9800 d) 10000
C
If a settlement option is not chosen by the policy owner or the beneficiary, what option will be used by the insurer? a) fixed period b) fixed amount c) lump sum d) life income
C
All of the following are true regarding the waiver of cost of insurance rider EXCEPT a) the rider cannot waive the cost of premiums that accumulate cash value b) the rider expires when the insured reaches age 60 c) the rider waives insurance costs in the event the insured becomes disabled d) the rider is only applicable to universal life policies
b
Under which of following conditions would life insurance proceeds be taxable by the federal government? a) if paid to the policyowner b) if there is a transfer for value c) if collaterally assigned to a lender d) if taken as a lump sum
b
How much time does an insurer have to acknowledge the receipt of notice of claim? a) 5 working days b) a week c) 10 working days d) 30 calendar days
c
Insurance contracts are unilateral in nature. What does that mean? a) the insured must make a promise to pay the premium b) all parties to the contract exchange something of value c) a promise is made only at the time of policy application d) only one party makes a promise
d
Which type of insurance policies provides pure life insurance protection without a saving element? a) permanent b) variable c) universal d) term
d
What type of an interest rate is guaranteed in universal life policies? a) current interest rate b) contract interest rate c) nominal interest rate d) adjustable interest rate
b
A life insurance policy qualifies as a Modified Endowment Contract if the amount of premium paid exceeds the amount that would have provided paid-up insurance in how many years? a) 3 years b) 5 years c) 7 years d) the life of policy
c
The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective? a) as of the first of the month after the policy issue b) as of the policy issue date c) as of the application date d) as of the policy delivery date
c
Which of the following is true regarding pure life annuity settlement options? a) the beneficiary will receive a refund of the principal b) it guarantees income for a specified period of time c) it provides the highest monthly benefit d) it guarantees that all the proceeds will be paid out
c
Who is the annuity owner? a) the person who receives the benefits b) the person on whose life the annuity is written c) the insurer d) the person who purchases the annuity
d
All of the following statements about equity index annuities are correct EXCEPT a) they invest on a more aggressive basis aiming for higher returns b) the annuitant receives a fixed amount of return c) they have a guaranteed minimum interest rate d) the interest rate is tied to an index such as SP500
b
The annuitant dies while the annuity is still in the accumulation stage. Which of the following is TRUE? a) the owner's estate will receive the money paid into the annuity b) the insurance company will retain the cash value and pay back the premiums to the owner's estate c) the money will continue to grow tax-deferred until the liquidation period, and then will be paid to the beneficiary d) the beneficiary will receive the greater of the money paid into the annuity or the cash value
A
When calculating the amount a policyowner may borrow from a variable life policy, what must be subtracted from the policy's cash value? a) outstanding loans and interest b) the face amount c) mortality costs d) the cash surrender amount
A
In life insurance, which of the following is NOT required to have an insurable interest in the insured? a) the beneficiary b) the policyowner c) the insured d) the applicant
a
Under what circumstances will the contingent beneficiary receive the death benefit? a) if the primary beneficiary dies before the insured b) if the tertiary beneficiary dies before the insured c) if designated by the insured d) if designated by the primary beneficiary
a
When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following? a) consideration b) legal purpose c) contract of adhesion d) acceptance
a
Which of the following best describes pure life annuity? a) it provides the highest monthly benefits b) it continues payments to the beneficiary when the annuitant dies c) it is also known as refund life annuity d) it guarantees to pay out all the proceeds
a
All of the following are true of a nonqualified deferred compensation plan EXCEPT a) it does not require IRS approval b) it can be discretionary c) contributions are tax deductible d) it is contractual agreement whereby the employee agrees to defer receipt of a portion of his compensation until retirement, disability, or death
c
All of the following are true of annually renewable term insurance EXCEPT a) the death benefit remains level b) the policy renews regardless of the insured's health c) proof of insurability must be provided at each renewal d) the premium increases each year
c
