Final Exam 2

Which statement is TRUE regarding a Variable Whole Life policy?

A minimum guaranteed Death benefit is provided

Which of the following transactions would be considered a Life Insurance policy replacement?

Cash surrender an existing whole life policy and purchasing a new whole life policy

T applies for a life insurance policy and is told by the producer that the insurer is bound to the coverage as of the date of the application or medical examination, whichever is later. Assuming that T is an acceptable risk, what item is given to T?

Conditional receipt

When an individual is planning to protect his family with life insurance, one method of doing so is called needs analysis. What exactly does needs analysis involve?

Establishes the needs of the individual and his dependents

Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE?

Evidence of insurability is required when the option is exercised

N purchases an annuity by making payments in an amount no less than $100 quarterly. This describes which of the following annuities?

Flexible Installment Deferred

Variable annuities may invest premiums in each of the following, EXCEPT: Common Stock Money Market securities Insurer's corporate business account Junk bonds

Insurer's corporate business account

What type of life policy covers 2 lives and pays the face amount after the first one dies?

Joint life policy

The Accelerated Death Benefit provision in a life insurance policy is also known as a(n):

Living Benefit

S filed a written Proof of Loss for a Disability Income claim on September 1. The insurance company did not respond to the claim. S can take legal action against the insurer beginning:

November 1

Which of these statements concerning an Individual Straight Life annuity is accurate?

Payments are made to an annuitant for life

What is considered to be a characteristic of a Conditionally Renewable Health Insurance policy?

Premiums may increase at time of renewal

P is a producer who notices 5 questions on a life application were not answered. What actions should P take?

Set up a meeting with the applicant to answer the remaining questions

What kind of life insurance product covers children under their parent's policy?

Term rider

K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however the check was never signed by the applicant. If the application is approved, when will coverage be effective?

The date the agent delivered the policy, collected the initial premium, and obtained a good health statement from the insured

When applied to Whole Life insurance, the word "straight" denotes:

The duration of premium payments

D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary's receive?

The full face amount

Which of the following statements regarding a Tax Sheltered Annuity (TSA) is INCORRECT? The income from the TSA is received income tax-free The amount contributed is deductible from taxable income The interest earnings are tax deferred A tax-sheltered annuity is available to employees of non-profit organizations

The income from the TSA is received income tax-free

T files a claim on his Accident and Health policy after being treated for an illness. The insurance company believes that T misrepresented his actual health on the initial insurance application and is, therefore, disputing the claim's validity. The provision that limits the time period during which the company may dispute a claim's validity is called:

Time Limit on Certain Defenses

A 42-year-old executive wants to purchase life insurance that will allow for increases or decreases to coverage as his/her needs change. Which of the following policies will best meet this need?

Universal Life

When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?

Void the policy only if it is discovered during the Contestable period and proven to be material

The automatic premium loan provision is designed to:

avoid policy lapse

Medicare is intended for all of the following groups, EXCEPT:

full time student

With Disability Income insurance, an insurance company may limit the monthly benefit amount a prospective policy holder may obtain because of the insured's:

gross income at the time of purchase

Basic Hospital and Surgical policy benefits are:

lower than the actual expenses incurred

Which type of plan normally includes hospice benefits?

managed care plans

An individual Disability Income insurance applicant may be required to submit all of the following information, EXCEPT: medical history gross income occupation spouse's occupation

spouses occupation

What type of life insurance are credit policies issued as?

term

A disability elimination period is best described as a:

time deductible

T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay?

$50,000

An agent must notify the Commissioner of Insurance within __ business days of an address change.

10

The type of annuity that can be purchased with one monetary deposit is called a(n):

IMMEDIATE ANNUITY

In a qualified retirement plan, the yearly contributions to an employee's account:

are restricted to maximum levels set by the IRS

If a company accepts a renewal premium payment that would extend coverage beyond the policy's MAXIMUM age limit, the company

must continue the coverage to the end of the period of time for which the premium was accepted

In an individual retirement account (IRA), rollover contributions are:

not limited by dollar amount

The policyholder has how many days to return an Accident/Health Insurance Policy and receive a full refund on premiums?

10

How long is the free-look period for accident and health policies sold in North Carolina?

10 days

Approved premium rates for group health insurance shall be guaranteed by the insurer for an initial period of not LESS than how many months?

12

A temporary license may be issued for a MAXIMUM period of how many days?

180

What type of policy would offer a 40-year old the quickest accumulation of cash value? Paid-up at 65 20-pay life 30-pay life Straight whole life

20 pay life

Under a Group Health Insurance Policy, continuation shall be available only to an employee who has been insured immediately prior to the date of termination for a period of AT LEAST

3 months

AT LEAST how many days before the effective date of a rate increase must an insurer provide written notice to individual accident and health policyowners?

30

If after satisfactory proof of loss, an insurer fails or refuses to pay death proceeds, the insurer must pay interest on the proceeds after how many days?

30

A Loss-Purchase Buy and Sell agreement among three partners, funded with individual life insurance, would require how many policies?

6

Eligible employees must be added to group health coverage NO LATER than how many days after their first day of employment?

90

P received Disability income benefits for 3 months then returns to work. She is able to work one month before her condition returns, leaving her disabled once again. What would the insurance company most likely regard this second period of disability as?

A recurrent disability

Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features?

Aleatory Insurance contracts are aleatory in that the amount the insured will pay in premiums is unequal to the amount that the insurer will pay in the event of a loss.

How are policyowner dividends treated in regards to income tax?

Interest on accumulations is taxed

What type of life policy has a death benefit that adjusts periodically and is written for a specific period of time?

decreasing term

A policy of adhesion can only be modified by whom?

insurance company

Inducing or attempting to induce any insured person through misrepresentation to lapse, forfeit, or surrender insurance is

twisting

Which of the following is NOT included in an annuity contract? Nonforfeiture benefit Free-Look period Beneficiary AD&D rider

AD&D rider

An applicant for a nonresident agent license MUST meet which of the following requirements?

Be licensed as an agent in the agent's state of domicile

What is considered to be a characteristic of an immediate annuity?

Benefit payments start within one payment period of purchase

N, age 50, recently bought an annuity that will pay a guaranteed $2,000/month at age 70 for life. What type of annuity did N purchase?

Fixed Deferred

Viatical settlements between a policyowner and a viatical settlement provider are negotiated through a(n)

viatical settlement broker

When a policyowner cash surrenders a Universal Life insurance policy in it's early years, this may be considered a red flag for a(n):

Anti-Money Laundering violation

When does a Probationary Period provision become effective in a health insurance contract?

At the policy's inception

Which of the following statements about Health Reimbursement Arrangements (HRA) is CORRECT? If the employee had a qualified medical leave from work, lost wages can be reimbursed If the employee paid for qualified medical expenses, the reimbursements may be tax-free Any unused amounts are added to employee's gross income Health insurance premiums can be reimbursed to the employee

If the employee paid for qualified medical expenses, the reimbursements may be tax-free

A 55 year old recently received a $30,000 distribution from a previous employer's 401k plan, minus $6,000 withholding. Which federal taxes apply if none of the funds were rolled over?

Income taxes plus a 10% penalty tax on $30,000 All withdrawals from a qualified retirement plan are taxable as current income. In addition, any withdrawals made before age 59 1/2 is subject to an additional tax penalty of 10% of the amount withdrawn.

Information obtained from a phone conversation to the proposed insured can be found in which of these reports?

Inspection report

If the insured and primary beneficiary are both killed in the same accident and it cannot be determined who died first, where are the death proceeds to be directed under the Uniform Simultaneous Death Act?

Insured's contingent beneficiary

All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured's death, EXCEPT:

Interest Only

Which of the following statements about accumulated interest earned on dividends from an insurance policy is TRUE?

It is taxed as ordinary income

Which of the following is NOT an unfair claim settlement practice? Failing to acknowledge and act promptly with respect to an insurance claim Compelling an insured to initiate a lawsuit by offering less on an insurance claim Failing to accept or deny a claim within reasonable time after proof of loss is submitted Needing written documentation of claim details

Needing written documentation of claim details

What type of renewability guarantees premium rates and renewability? Optionally renewable Conditonally renewable Noncancellable Guaranteed renewable

Noncancellable

Which of these statements accurately describes the Waiver of Premium provision in an Accident and Health policy? Past due premiums on a lapsed policy are waived and coverage is restored The insured is paid a monthly benefit to keep insurance premiums current in the event of total disability Premiums are waived after the insured has been unemployed for a specified time period Premiums are waived after the insured has been totally disabled for a specified time period

Premiums are waived after the insured has been totally disabled for a specified time period

The percentage of an individual's Primary Insurance Amount (PIA) determines the benefits paid in which of the following programs?

Social Security Disability Income

The following acts are examples of unfair methods of competition and deceptive practices in the business of insurance EXCEPT the use of misrepresentations and false advertising of policy contracts false financial statements comparisons showing that a policy has higher benefits rebates

comparisons showing that a policy has higher benefits

The incontestable clause allows an insurer to:

contest a claim during the contestable period

All of the following statements about health coverage for newborns are correct EXCEPT coverage begins and benefits are payable from the moment of birth coverage includes necessary care and treatment of congenital defects coverage during the first year is limited to congenital defects continued coverage after the first 31 days is dependent on notification

coverage during the first year is limited to congenital defects

Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?

decreasing term

Insurers organized under the laws of North Carolina are called

domestic companies

What kind of special need would a policyowner require with an Adjustable Life insurance policy?

flexible premiums

A certificate of authority permits an

insurance company to transact business

An insurance company normally has 2 years to contest information provided on an accident and health application. This 2 year period begins on the date that the:

insurer dates the policy

Quarterly premium payments increase the annual cost of insurance because

interest to the insurer is decreased while the administrative costs are increased