Final Exam - North Carolina Life Agent
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
20-Pay Life accumulates cash value faster than Straight Life
Minors in North Carolina age __ and up can enter into life insurance contracts and have all the rights that come with ownership.
15
A 15-year mortgage is best protected by what kind of life policy?
15-year decreasing term
Under the North Carolina insurance code, an insurance company must pay death benefits for suicide if the policy has been in force for a MINIMUM of
2 years
North Carolina requires that an insurance agent must complete __ hours of continuing education on the subject of law and ethics every two years.
3
ABC Insurance Company fails to pay death proceeds after satisfactory proof of loss was submitted. ABC must then begin paying interest on the death proceeds after __ days of receiving proof of loss.
30
An individual life insurance policy issued in North Carolina MUST have a grace period for premium payment of how many days?
31
One becomes eligible for Social Security disability benefits after having been disabled for:
5 months
How long must every insurance agent maintain all records, books, and documents related to each insurance transaction?
5 years
A Loss-Purchase Buy and Sell agreement among three partners, funded with individual life insurance, would require how many policies?
6
K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
20,000 death benefit
P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take?
Beneficiary will be paid the Death Benefit
A life policy loan in North Carolina cannot charge a fixed rate of interest higher than
8%
A life insurance application must be signed by all of these EXCEPT:
Beneficiary
In North Carolina, which of the following MUST be delivered to a policyowner upon the sale of an individual life insurance policy?
A Policy Summary and Buyer's Guide
If X wants to buy $50,000 worth of permanent protection on his/her spouse and $25,000 worth of 10-year Term coverage on X under the same policy, the applicant should purchase
A Whole Life Policy with an Other Insured Rider
If a licensee or person willingly misstates information on any financial document or statement, the entity in which they represent is subject to a fine between:
$2,000-$10,000
G purchased a Family Income policy at age 40, The policy has a 20-year rider period. If G were to die at age 50, how long would G's family receive an income?
10 years
The Accelerated Death Benefit provision in a life insurance policy is also known as a(n)
Living Benefit
Which of the following is TRUE about a qualified retirement that is "top heavy"?
More than 60% of plan assets are in key employee accounts
S recently received a $500,000 lump sum retirement buyout from her employer. She would like to buy an annuity that will immediately furnish her with a guaranteed income for life. What type of annuity is best suited for her situation?
Single Premium
When an existing life insurance policy is being reissued with a reduction in cash value, the producer must sign the
Notice Regarding Replacement of Life Insurance or Annuity
The annuity that represents the largest possible monthly payment to an individual annuitant is a(n)
Straight life annuity
Which is true concerning a Variable Universal Life policy?
Policyowner controls where the investment will go and selects the amount of the premium payment
Which of these provisions require proof of insurability after policy has lapsed?
Reinstatement
J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions?
Reinstatement provision
T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this?
Renewable
When an existing life insurance policy is terminated so that a new life insurance policy can be purchased, this transaction is referred to as
Replacement
T is covered by an Accidental Death and Dismemberment (AD&D) policy that has an irrevocable beneficiary. What action will the insurance company take if T requests a change of beneficiary?
Request of the change will be refused
J would like to maintain the right to change beneficiaries. Which beneficiary designation should be used?
Revocable
Equity indexed annuities are invested in which of the following:
S&P 500
Under a Renewable Term policy,
The renewal premium is calculated on the basis of the insured's attained age
A life policy with a death benefit that can fluctuate according to the performance of its underlying investment portfolio is referred to as:
Variable Life
Which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?
Variable Life
Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?
Variable Universal Life
S is a life insurance policyowner and enters into a written agreement to receive immediate cash in exchange for the sale and transfer of her life insurance policy. This agreement is referred to as a(n):
Viatical Settlement
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 part of a life insurance policy guaranteed to be true is called a(n)
Warranty
What action will an insurer take if an interest payment on a policy loan is not made on time?
automatically add the amount of interest due to the loan balance
In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy?
owners rights
Whole Life insurance policies are contractually guaranteed to provide each of the following EXCEPT:
partial withdrawal features beyond a surrender charge period
M has an insurance policy that also has an outstanding policy loan at the time of M's death. The insurer will deduct the outstanding loan balance from the
policy proceeds
A retirement plan that sets aside part of the company's net income for distributions to qualified employees is called a
profit-sharing plan
An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?
Full face amount minus any past due premiums
What is considered a valid reason for small businesses to insure the lives of its major shareholders?
Fund a buy-sell agreement
Immunity for releasing documents to the commissioner during a fraud investigation means that person:
Is not subject to civil liability or slander
Credit life insurance is typically issued with which of the following types of coverage?
Decreasing term
The circulation of written literature that is maliciously critical of an insurer's financial condition is called
Defamation
Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?
Life Income
Which of these would be considered a Limited-Pay Life policy?
Life Paid-Up at Age 70
The purpose of the insurance guaranty fund is to
Ensure that claims filed against involving insurance companies will be paid
S is close to retiring and would like to purchase a policy that will yield greater gains than bonds, but will still protect the principal with a minimum level or risk. Which product would S be advised to purchase?
Equity index insurance
Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE?
Evidence of insurability is required when the option is exercised
Term insurance has which of the following characteristics?
Expires at the end of the policy period
What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years?
Family Maintenance Policy
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 Equity indexed
Flexible Installment Deferred
What kind of special need would a policyowner require with an Adjustable Life insurance policy?
Flexible premiums
T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of 20 years. What type of annuity is this?
Life annuity with Period Certain
A whole life insurance policyowner does not wish to continue making premium payments. Which of the following enable the policyowner to sell policy for more than cash value?
Life settlement
What is considered to be a characteristic of an immediate annuity?
Benefit payments start within one payment period of purchase
Which of these is an element of a Variable Life policy?
A fixed, level premium
Which of the following statements about noncontributory employee group life insurance is FALSE?
A minimum number of employees is required to participate
Each agent who initiates an application for life insurance or annuity for replacement of an existing policy shall submit which of the following as a part of the application?
A signed statement by the applicant regarding the replacement
Which provision is NOT a requirement in a group life policy?
Accidental
The Commissioner of Insurance is responsible for
Administering insurance laws
How long does the coverage normally remain on a limited-pay life policy?
Age 100
The Consideration clause in a life insurance contract contains what pertinent information?
Amount of premium payments and when they are due
Which premium schedule results in the lowest cost to the policyowner?
Annual
A life insurance company cannot declare a policy lapsed or forfeited within one year after default in premium payment, unless it has mailed a notice indication the amount of premium due. This requirement only applies to policies with and
Annual premium schedule
What action can a policyowner take if an application for a bank loan requires collateral?
Assign policy ownership to the bank
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
Which statement about a whole life policy is correct?
Cash value may be borrowed against
The Commissioner may exempt an applicant from the licensing exam if an applicant has obtained any of the following designations, EXCEPT:
Chief operating officer (COO)
On August 6, D submitted an application for a $50,000 Life Insurance policy and did not pay the initial premium. On August 18, D went to his doctor complaining of chest pains and some tests were given by the doctor. The life policy was delivered by the producer on August 20 and D explains what had recently taken place with the doctor. What action should the producer then take?
Collect initial premium along with a signed health statement
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, provided that T is an acceptable risk. What item is given to T?
Conditional receipt
Insurance policies offered on a "take it or leave it" basis are considered what?
Contracts of Adhesion
What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability?
Convertible Term
An employee requested that the balance of her 401(k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately has the funds rolled over into an IRA. What is the tax consequence of the distribution sent to this employee?
Distribution is subject to federal income tax withholding
A long-term care rider in a life insurance policy pays a daily benefit in the event of which of the following?
Inability of the insured to perform more than 2 Activities of Daily Living (ADL's)
A 55 year old recently received a $30,000 distribution from a previous employer's 401k plan, minus $6,000 for income tax withholding. Which federal taxes apply if none of the funds were rolled over?
Income taxes plus a 10% penalty tax on $30,000
A policy owner's rights are limited under which beneficiary designation?
Irrevocable
T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity. What will this transaction provide?
Income that cannot be outlived by the owner
How does an indexed annuity differ from a fixed annuity?
Indexed annuity owners receive credited interest tied to the fluctuations of the linked index
A Certificate of Authority permits an
Insurance company to transact business
All of these statements about the Waiver of Premium provision are correct, EXCEPT:
Insured must be eligible for Social Security disability for claim to be accepted
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
Variable annuities may invest premiums in each of the following, EXCEPT:
Insurer's corporate business account
In a Life insurance contract, an insurance company's promise to pay stated benefits is called the
Insuring clause
The PRIMARY purpose of the life insurance replacement regulation is to protect the:
Interests of policyowners
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 combination plans is designed to protect and insured from an unpaid mortgage balance upon premature death?
Joint Life
What type of life policy covers 2 lives and pays the face amount after the first one dies?
Joint Life Policy
Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements?
Legal Purpose (Insurable Interest)
The amount received for a life insurance policy in a viatical settlement is:
Less than the death benefit
K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable?
Level
D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed?
Level Term
A policyowner is allowed to pay premiums more than once a year under which provision?
Mode of Premium
Which type of policy is considered to be overfunded, as stated by IRS guidelines?
Modified Endowment Contract
Which of these is NOT considered to be a right given to a policyowner?
Modify a provision in the insurance contract
K sent a renewal premium payment to her insurer that would extend her coverage beyond the policy's maximum age limit. If the insurer accepts this premium payment, it:
Must continue the coverage to the end of the period of time for which the premium was accepted
Which of the following statements is correct about accelerated death benefits?
Must have a terminal illness to qualify
All of these statements concerning Settlement Options are true, EXCEPT:
Only the beneficiary may select
P and Q are married and have three children. P is the primary beneficiary on Q's Accidental Death and Dismemberment (AD&D) policy and Q's sister R is the contingent beneficiary. P, Q, and R are involved in a car accident and Q and R are killed instantly. The Accidental Death benefits will be paid to
P only
All of the following statements are true regarding a policy's Grace period, EXCEPT:
Past due premiums are waived
Which of these statements concerning an Individual Straight Life annuity is accurate?
Payments are made to an annuitant for life
Which of the following provisions guarantees that premiums will be waived if a Juvenile Life policyowner becomes disabled?
Payor clause
What benefit does the Payor clause on a Juvenile Life policy provide?
Premiums are waived if the payor becomes disabled
What determines the full amount of Social Security retirement benefits a qualified individual is entitled to receive?
Primary Insurance Amount (PIA)
What type of life policy covers two people and pays upon the death of the last insured?
Survivorship
T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of $10,000 policy should T purchase?
Ten-Year Endowment
A policy of adhesion can only be modified by whom?
The Insurance Company
A temporary license is issued by the Commissioner of Insurance to allow
The personal representative of a deceased producer to provide service to existing policyowners
C is trying to determine whether to convert her convertible term life policy to whole life insurance using her original age or attained age. What factor would affect her decision the most?
The cost
Who is normally considered to be the owner of a 403(b) tax-sheltered annuity?
The employee
A noncontributory group term life plan is characterized by:
The entire cost of the plan is paid for by the employer
Which of the following characteristics is CORRECT about Interest Sensitive Whole Life?
There is a flexible premium payment
The Common Disaster clause provides that if both the insured and the sole named beneficiary were to die in a common accident, which of the following is true?
This clause provides the payment of proceeds to the insured's estate
How does a typical Variable Life Policy investment account grow?
Through mutual funds, stocks, bonds
Boycott, coercion, and intimidation that result in the unreasonable restraint of trade are prohibited under the North Carolina insurance laws covering
Unfair trade practices
When is the face amount paid under a Joint Life and Survivor policy?
Upon death of last insured
A term life insurance policy matures
Upon the insured's death during the term of policy
A(n) ______ Life policy offers the owner investment in products such as money-market funds, long-term bonds and equities.
Variable
What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100?
Whole Life
According to North Carolina's rules on disclosure, a life insurance applicant is expected to be provided with
a Buyer's Guide and Policy Summary
Anyone who knowingly provides an untrue, false or fraudulent claim to an insurance company is guilty of:
a felony
To be eligible for Social Security disability benefits, an employee must be unable to perform
any occupation
Unfair discrimination is described as
charging different rates for persons in the same class
Life insurance and Annuity Replacements define replacement as
exchanging an existing policy for a new policy
All of these are characteristics of an Adjustable Life policy EXCEPT
face amount can be adjusted using policy dividends
The Life and Health Insurance Guaranty Association is
funded by admitted insurance companies through assessments
Which of the following actions require a policyowner to provide proof of insurability in an Adjustable Life policy?
increase face amount
A Renewable Term Policy is renewable at the option of the
insured
The Commissioner of insurance may suspend, revoke, or refuse to renew the license of a producer who
is found guilty of misrepresentation or fraud in obtaining the license
If a blank insurance contract application is signed by an agent, the agent
is guilty of a misdemeanor
Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The widow qualifies for the
marital deduction
Which of the following statements regarding a Tax Sheltered Annuity (TSA) is incorrect?
the income from the TSA is received income tax-free
A level premium indicates
the premium is fixed for the entire duration of the contract
ABC Insurance Company has accepted a life insurance application which contains unanswered questions. The company then makes the application part of the life contract. In this situation, the insurer has
waived one of its legal rights
A policy that becomes a Modified Endowment Contract (MEC):
will lose many of its tax advantages
An agent's license can be suspended or revoked by
writing primarily controlled business