Final exam New Mexico Life Only
The grace period for a life insurance policy with an annual premium is usually
30 says
In NM, who would be eligible for a temporary agents license
A designated employee who is replacing a deceased agent
A policyowner pays first annual premium for $50,000 life insurance policy and dies one month after the policy effective date. Which of these statements is normally true?
Beneficiary receives $50,000 income tax-free
The irs has a minimum coverage rule regarding qualified retirement plans. This rule states that each qualified plan is required to
Benefit a broad cross-section of employees
An agent who makes an agreement that unreasonably restrains the business of insurance may have violated regulations against
Boycott, coercion and intimidation
For policyholders in the same risk classification, it is unlawful to
Charge different premiums
Which provision makes the application part of the annuity contract?
Entire contract clause
Which benefit supplement added to a life insurance policy insures an entire family?
Family term rider
What is another name for a Keogh plan
HR 10 plan
When an insurance appointment with an agent is terminated, the party must notify the agent of the termination is the
Insurer
Which statement is INCORRECT about the interest-only settlement option in a life insurance policy?
Interest on proceeds must be paid by the beneficiary
A signed good health statement may be collected by a life producer at the time of
Policy delivery
Which of the following would most likely purchase an immediate annuity?
Retiree having a lump sum to invest
What does a fixed life annuity offer protection against?
Savings depletion due to longevity
Security laws passed by Congress are enforced by which Federal agency?
Security and Exchange Commission (SEC)
All of these statements concerning group credit life insurance are false EXEPT
The face amount is based on the outstanding loan balance
What is a certificate of authority?
The license required for an insurer to conduct business in the state
What is the face amount of a $50,000 graded death benefit life insurance policy when the policy issued?
Under 50k initially, but increases overtime
An insurable risk requires
that the chance of loss be calculable
A licensee who is required to take continuing education must include how many ethics coursework hours?
1
A(n) _agent is an insurance agent who represents only ONE insurance company.
Captive
Which of the following is NOT an intended use of an annuity?
Create new funds upon the death of a wage-earner
Which of these is NOT a common life insurance nonforfeiture option?
Life income annuity
A teacher recently retired at age 63 and has a tax sheltered annuity (TSA). Periodic deposits total $120,000 and the value of the contract is now worth $200,000. How much is taxed if the current value is surrendered today?
$200,000
What is the maximum number of employees (earning at least 5k) that an employer can have in order to start SIMPLE retirement plan
100
A life insurance policy in NM becomes incontestable after it has been force for
2 years
Which situation would not require the insureds consent when a life insurance policy is issued
A policy is purchased by a parent for a minor child
Two agents are licensed in the same line of insurance. One agent provides the other with a referral that resultin a sale. How will the commission on this sale likely be paid
Absents will share commision
A life insurance policy provision that has ability to reduce the death benefit is called the
Accelerated benefit (living)
Which statement regarding a single premium life insurance policy is NOT correct?
Additional premiums may be required under certain conditions
All of the following are unfair claims settlement practices EXCEPT
An attempt to settle a claim by arbitration
Which of the following is NOT a reason for a business to buy key person life insurance?
An increased pension liability if the key employee dies
Which type of policy can group term life insurance normally be converted to?
An individual permanent life insurance policy
Misrepresenting pertinent policy provisions relating to a coverage after a loss is
An unfair claims settlement practice
Which is an accurate description of the premium in a graded premium life insurance policy?
Annual increases in premium for a stated number of years then levels off for the remainder of the contract
During the liquidation phase of an annuity contract, to whom are the income benefits normally payable to?
Annuitant
Traditional individual retirement annuity (IRA) distributions must start by
April 1st of the year following the year the participant attains age 70 1/2
Kevin has an existing life insurance policy and assigns it to another insurer for a new contract. How would this transaction be treated for tax purposes?
As a Section 1035 exchange
How may an insurance company classify an accidental death benefit on a life policy?
As an optional policy rider
When does the insured stop making payments under a third-payment whole life policy?
At the time of death or 30 years after the policy's inception, which ever comes first
Which term refers to insurance written on the interests of the licensee, the licensee's employer, or the licensee's immediate family?
Controlled business
The policy provision that permits an employee to change from group life coverage to an individual life policy is called the
Conversation provision
Which of the following disability buy-sell agreements is best suited for businesses with a limited number of partners?
Cross-purchasing agreement
What kind of life policy typically offers mortgage protection?
Decreasing term
In a speech to a local association, an agent incorrectly stated that XYZ insurance company is in financial difficulty and not paying claims. The agent is guilty of
Deflamation
Which of the following is NOT guaranteed in a whole life policy?
Dividend scale
An annuitant is paid $495 per month until the contract value is exhausted at some undetermined date in the future. Which type of annuity payout option is this?
Fixed amount
Which life insurance provision allows a policyowner to cancel the policy and receive a full refund within a limited time period after policy delivery?
Free look period
A policyowner has just borrowed from a life insurance policy's cash value. Which of these statements is true?
In the event of death, the loan amount is deducted from the policy proceeds
Which life insurance policy clause prohibits an insurance company from questioning the validity of the contract after stated period of the time has passed?
Incontestable clause
All of these are considered features of whole life insurance EXCEPT
Initial premium is lower than for an equivalent amount of term insurance
A retired couple would like to maximize the income derived from their combined life savings and have it payable until they both die. Which annuity would be their best choice?
Joint and survivor annuity
An insurance policy may be issued with a preferred insurance premium in all these situations EXEPT
Living in a rural area
Which of these is NOT relevant when determining the amount of personal life insurance needed?
Local unemployment rate
The annuitant in a single premium deferred annuity (SPDA)
Makes only one premium payment
According to Federal Fraud and False Statements Act, which of these is considered to be an intentional violation?
Making false entries in a company's books
What would be valid reason for naming a trust as the beneficiary of a life insurance policy as opposed to naming an individual?
Management of proceeds would be provided
A life insurance policy's contingent beneficiary is the
Person who receives the death benefits of the primary beneficiary dies before the insured
How are level term policies able to provide level premiums
Premiums are averaged over the term of the policy
Which of the following outlines the authority given to the producer on behalf of the insurer?
Producer contract
Under Federal Law, which of the following actions may result in a producer becoming imprisoned?
Producer embezzling funds from insurer
A cease and desist order issued by the superintendent against an agent
Prohibits a specific practice listed in the order
The Superintendent may suspend an agent's license when the agent
Rebates a portion of the commission to the insured
Which of the following is an unincorporated association whose members provide coverage for one another?
Reciprocal
What effect can a long term care benefit rider have in a life insurance policy?
Reduced death benefit
A life insurance policyowner would like a dividend option that results in a limited current outlay of funds. Which dividend option would be chosen?
Reduction of premium payment
Any of the following may be an unfair claims practice EXCEPT
Refusing to pay persons bringing false or fraudulent claims
A(n) ________ insurer assumes risk from another insurance company.
Reinsurance
A life insurance policy's waiver of premium rider has the ability to
Relieve the insured of premium payments following an initial waiting period after the insured becomes totally disabled
What is the insurer responsible for when a producer is acting within the scope of authority granted in the agency contract?
Responsible for acts by the producer that are authority only
Sylvia purchased an annuity for $100,000 from the proceeds of an inheritance. No further payments are permitted and the income stream begins in 15 years. This contract is a(n)
Single Premium Deferred Annuity
A life insurance agent licensed in NM is authorized to
Solicit receive and forward application to insurer
The premiums paid by an employer for his employee's group life insurance are usually considered to be
Tax deductible to the employer
When a ten year renewable term life insurance policy issued at age 45 is renewed, the premium rate will be the current rate for
Ten year term insurance for a person aged 55
Under the Fair Credit Reporting Act, which statement is true?
The consumer who was investigated must be advised that credit, insurance, or employment was denied because of an unfavorable report.
What is considered the collateral on a life insurance policy loan?
The policy's cash value
Which of these must be disclosed in a universal life policy?
The policy's surrender charges
A life insurance illustration showing future premiums being paid out of nonguaranteed values must disclose that
The policyowner may need to resume premium payments depending on actual results
Replacing a policy when it is NOT on the best interest of the client is known as
Twisting
Insurance crimes which affect interstate commerce are prosecuted by the
US Attorney General
A terminally ill policyowner decides to sell his life insurance policy at a discount to help support his family. This scale is called a(n)
Viaticle settlement
A policy owner with a terminal illness who sells his life insurance policy to a third party is called a
Viator
An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?
When the conditions of the receipt are met
When an insured under a group life insurance plan in NM elects the conversation option, the new policy is issued
Without requiring evidence of insurability
An individual who purchases a modified life insurance policy expects
an improvement in future income
Who normally pays the premiums for group credit life insurance?
borrower
What is payable to the policyowner if a whole life policy is surrendered prior to its maturity date
cash value
When a sum of money undergoes capital liquidation, that sum will
decrease in size
What happens to the purchasing power of benefit payments from a fixed life annuity when the cost of living goes up
decreases
A qualified profit-sharing plan is designed to
distribute a portion of company earnings to its employees
Scott has a life insurance policy in which the dividends are left with the insurance company. This particular policy may be paid up when the cash value plus accumulated dividends
equal the net single premium for the same face amount at the insured's attained age
An insurance company writing business in a state other than one in which it is domiciled is called
foreign
What is an insurance contract that identifies individuals by relationship to a specific organization?
group insurance
With life insurance, the needs approach is used primarily in determining
how much life insurance a client should apply for
XYZ Insurance Company gives direct authority to its producers to sell insurance through an agency contract, but nothing is stated regarding the collection of premiums. Which authority grants the producer the right to collect premiums?
implied authority
The Medical information Bureau consists of members from which group
insurance companies
After the extended term life nonforfeiture option is chosen, the available insurance will be
level term for a stated period of time
Risk ____ is the process of analyzing exposures that create risk and designing programs to handle them
management
If an agent misleads or fails to adequately disclose the title and true nature of a policy offered to a potential insured, it may be considered
misrepresentation
Which of these factors does NOT affect life insurance premium rates?
producer certification
The automatic premium loan provision can be accurately described as a
provision that provides a policy loan to pay any premiums by the end of the grace period
A transaction in which a new life insurance policy is purchased and an existing life insurance policy is surrendered is called
replacement
The reason for backdating a policy is
to obtain a premium rate based on an earlier age
A business becoming incorporated is an example of risk ____.
to transfer
A hold-harmless clause is an example of risk
to transfer
Which life insurance policy would be eligible to include an automatic premium loan provision
whole life
At what point are death proceeds paid in a joint life insurance policy?
When the first insured dies
Which statement regarding the waiver of premium rider is accurate
Cash payment is not directly provided to the policyowner
What must be given to a life insurance applicant when the agent receives an application and the initial premium
Conditional receipt
An insurance application requires an applicant to make a full, accurate disclosure of the risk factor involved. Using this criteria, an insurance policy is considered what type of contract?
Contract of utmost good faith
Why do insurers require a minimum number of employees participate in a group insurance plan?
Minimize adverse selection
Which life insurance policy provision prohibits a beneficiary from "commuting, encumbering, withdrawing,or assigning" any portion of the proceeds prior to actual receipt from the company?
Spendthrift clause
What happens to the cash value of a market value adjusted annuity if it's surrendered prior to the end of the stated guarantee period
Subject to market value adjustment
How does the cost for a survivorship life policy compare to the cost of combining two separate individual life insurance policies
Survivorship life policy is lower
What would be considered an advantage of purchasing term life insurance?
The initial premium is lower compared to an equivalent amount of whole life coverage
A policyowner is permitted to take out a policy loan on a whole life policy at what point?
When the policy has a cash value
If a basic illustration is not provided, an insurer MUST provide a policy summary to a prospective insured at which of the following times?
When the policy is delivered
When the superintendent believes an agent is causing substantial and material harm, the superintendent has the authority to
issue a cease and desist order against the agent
Which of these is NOT used as selection criteria in the underwriting process of a life insurance application?
national origin
The interest credited to the cash values of personally-owned non-qualified annuities is considered
tax deferred