Guarantee Exam

An IRA contribution can be made from which of the following? A.) Collectibles B.) Stocks and bonds C.) Cash D.) Life insurance

C.) Cash IRA contributions must be made in cash in order to be tax deductible. The money invested in the account can be used to buy stocks, bonds, mutual funds or annuities. The money used for IRA contributions cannot be used to purchase life insurance policies or collectibles such as art, antiques or stamps.

When a whole life policy is surrendered for its non-forfeiture value, what is the automatic option? A.) Extended term B.) Paid up additions C.) Cash surrender value D.) Reduced paid up

A.) Extended item The automatic non-forfeiture option is extended term.

The policy-owner has an option to pledge the life insurance policy as collateral for a bank loan. This is called.. A.) An insurance pledge B.) A unilateral agreement C.) An absolute assignment D.) A collateral assignment

D.) A collateral assignment. With a collateral assignment, the policy is pledged as collateral to pay the balance of a loan at the insured's death. The balance of the death benefit is paid to the beneficiary.

An example of an alien insurer doing business in this state is one formed under the laws of.. A.) Arizona. B.) Puerto Rico C.) Mexico. D.) District of Columbia.

C.) Mexico

Partners in a business want to make sure that if one of them were to pass away, their surviving family will receive a fair value for their portion in the business. What life insurance arrangement would be most suited for transitioning the business? A.) Buy-Sell Agreement B.) Deferred Compensation Plan C.) Executive Bonus Plan D.) Split Dollar Plan

A.) Buy-Sell Agreement

Which of the following best defines the unfair trade practice of rebating? A.) Charging premium amounts in excess of the amount stated in the policy. B.) Making false statements that are maliciously critical and intended to injury another person in the business of insurance. C.) Offering an inducement of something of value not specified in the policy. D.) Making statements that misrepresent an insurance policy in order to induce an insured to replace the policy.

C.) Offering an inducement of something of value not specified in the policy.

Variable insurance and variable annuities are regulated by... A.) Departments of Insurance only. B.) NAIC. C.) SEC and FINRA only D.) SEC, FINRA and Departments of Insurance.

D.) SEC, FINRA and Departments of Insurance

If an applicant's health is poorer than that of an average applicant, the policy may be issued.. A.) Standard. B.) Ordinary. C.) Preferred. D.) Substandard.

D.) Substandard If an insurance company issues a policy on an applicant whose health is below average, it may be issued on a substandard basis.

All of the following are advantages of a qualified retirement plan EXCEPT.. A.) The fund grow tax deferred. B.) The income at retirement is tax free. C.) The contribution is deductible to the employer. D.) The contribution is not taxable to the employee when made.

B.) The income at retirement is tax free. In a qualified plan any amounts not previously taxed will be taxed when the funds are received.

The Guaranteed Insurability Rider allows the owner to purchase additional amounts of life insurance without proof of insurability at all the following EXCEPT A.) Marriage. B.) Purchase of a new home. C.) Approximately every 3 years between the ages of 25 and 40. D.) Birth of a child.

B.) Purchase of a new home.

According to the Fair Credit Reporting Act, all of the following statements are true EXCEPT... A.) Investigative consumer reports can be used to obtain information on the applicant's character and reputation. B.) If an applicant is declined for an insurance policy, he or she has no right to know what was in the report C.) It protects consumers against the circulation of inaccurate information. D.) It ensures that consumer reporting agencies are fair in their treatment of consumers.

B.) If an applicant is declined for an insurance policy, he or she has the right to know what was in the report.

A legally acceptable attempt by an existing insurer, or its agent, to continue existing life insurance in force when a Comparative Information Form has been received from a replacing insurer is called.. A.) Conservation. B.) Intimidation. C.) Controlled business. D.) Rebating.

A.) Conservation. The Insurance Code requires that when a life insurance policy is being replaced by another insurer, the existing (ceding) insurer must be notified and have an opportunity to conserve the business.

In a life insurance application, all of the following signatures will be required EXCEPT... A.) The agent. B.) The home office underwriter. C.) The insured. D.) The owner (if different from the insured).

B.) The home office underwriter.

Where are premiums from fixed annuities invested? A.) A variable annuity B.) A hedge fund C.) A separate account D.) A general account

D.) A general account A fixed annuity is characterized by a general account into which the purchase payments (premiums) are invested.

A life insurance policy qualifies a Modified Endowment Contract (MEC) if the amount of premium paid exceeds the amount that would have provided paid-up insurance in how many years? A.) 7 years B.) The life of the policy C.) 3 years D.) 5 years

A.) 7 years If the policy's premium paid in its first 7 years exceed what would have been paid into a life policy with level annual premiums that would be paid-up in 7 years, the policy fails the 7-pay test and becomes a Modified Endowment Contract.

A married couple wants to include the entire family in their whole life policy under one rider. Which of the following will help them achieve that goal? A.) Other-insured term B.) Inclusive term C.) Children's term D.) Family term.

D.) Family term A Family Term policy is created when a Children's Term Rider and Spouse Term Rider are combined into a single rider which is attached to whole life policy. Under the Family Term Rider, the entire family is covered under the same policy.

Under what circumstances will the contingent beneficiary receive the death benefit? A.) If the tertiary beneficiary dies before the insured B.) If the designated by the insured C.) If the designated by the primary beneficiary D.) If the primary beneficiary dies before the insured

D.) If the primary beneficiary dies before the insured.

If an applicant submits the initial premium with an application, which action constitutes acceptance? A.) The applicant submits a statement of good health. B.) The producer delivers the policy. C.) The insurance company receives the application and initial premium. D.) The underwriters approve the application.

D.) The underwriters approve the application.

An Equity Indexed Annuity will grow based upon.. A.) Current interest rates. B.) A rate of interest determined by the banking system. C.) Performance of a recognized index. D.) Performance in a separate account

C.) Performance of a recognized index. An Equity Indexed Annuity grows based upon a specific recognized index such as the Dow Jones or the Standard and Poor's 500

Which of the following statements is true regrading SIMPLE plans? A.) Contributions and earnings are tax-deferred until funds are withdrawn. B.) The employer cannot contribute to the plan. C.) The employer can contribute up to 5% of the employee's annual compensation. D.)The employee cannot contribute to the plan.

A.) Contributions and earnings are tax-deferred until funds are withdrawn. Under SIMPLE plans, participating employees may defer up to a specified amount each year, and the employer can then contribute up to an amount equal to 3% of the employees' annual compensation.

Because of an injury, an insured has been unable to work 7 months. When his life insurance premium came due, he was unable to pay, yet the policy remained in force. The policy includes... A.) Waiver of premium rider. B.) Guaranteed insurability benefits. C.) Facility of payment clause. D.) Non-forfeiture options.

A.) Waiver of premium rider The Waiver of premium rider causes the insurer to waiver future premiums if the premium payer is disable for a period beyond 6 months or more.

An individual has a $200,000 convertible term life insurance policy. If he chooses, he can... A.) Convert to a whole life policy for the same face amount without proof of insurability. B.) Convert to another term policy with a lower face amount without proof of insurability. C.) Purchase an individual annuity for any face amount using the 1035 exchange privilege. D.) Purchase another term policy and increase his death benefit without proof of insurability.

A.) Convert to a whole life policy for the same face amount without proof of insurability. Conversion allows a term policy to be changed into a cash value policy (often whole life). While the premium will increase for the same amount of death benefit, no evidence of insurability is required.

Which of the following is a permissible reason for an insurance company to contest payment of a claim based on statements in the application? A.) The insurer has already paid out the expected amount of benefits for the year. B.) The application contains a correction. C.) The application contains material misstatements. D.) the insured died too soon after applying for the policy.

C.) The application contains material misstatements. An insurance company may contest payment of a claim on the basis of a material misstatement of facts or concealment of a material fact no later than 2 years after the policy became effective.

In contrasting stock insurers with mutual insurers, which statement is true? A.) Stock dividends are tax free while policy dividends are taxable. B.) Non-participating policies can pay out dividends to the policyholders. C.) Mutual insurers are owned by the shareholders and issue participating policies. D.) Stock insurers are owned by the shareholders and issue non-participating policies.

D.) Stock insurers are owned by the shareholders and issue non-participating policies.

Which of the following statements regrading HIV testing is not true? A.) Testing may be waived at the discretion of the insurer. B.) The insurer is responsible for the cost of HIV testing. C.) Written consent from the applicant is required prior to the examination. D.) Test results must be sent to the Department of Insurance.

D.) Test results must be sent to the Department of Insurance. The Department does not require HIV test results. However, the insurer is required to provide applicants with written policies and procedure concerning the internal dissemination of test results among producers and employees of the insurance company.

An insurance agent visits a potential client and explains various types of policies. The customer displays a lack of interest, so the agent guarantees higher dividends than he knows would be possible. Which term describes what the agent has done? A.) Rebating B.) Twisting C.) Defamation D.) Misrepresentation

D.) Misrepresentation Misrepresentation is the act of portraying sales material that is false, misleading or deceptive as to policy benefits or terms, the payment of dividends, etc. This refers to all forms of communication.